State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

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State Bank of India & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.

not only infuse an amount of Rs. 350 Crore within 180 days of the Effective Date, but also execute the mortgage of the three Dubai properties on the Effective Date. In other words, the Resolution Plan obligated the SRA to satisfy the following twin conditions for the PBG to be discharged – (a) infusing Rs. 350 Crore as the first tranche payment and (b) executing a mortgage on the three Dubai properties worth Rs. 250 Crore on the Effective Date. The learned ASG submitted that, it is not in dispute that the NCLT vide its order dated 11.04.2022 extended the time for achieving the Effective Date to 25.05.2022 and Respondent No.1 claimed to have achieved the same on 20.05.2022. Consequently, all the three Dubai properties ought to have been mortgaged on or before 20.05.2022.

33Copy pinpoint33. It was submitted that the Respondent SRA failed to make the first tranche payment of Rs. 350 Crore despite the fact that it ought to have been infused within 6 months from 20.05.2022. Instead, the Respondent SRA continuously contended that the order of the NCLT dated 13.01.2023 (holding that the Conditions Precedent have been fulfilled) was challenged by the Appellants before the NCLAT and that they could not therefore bring in Rs. 350 Crore since the Effective Date had not yet materialized.

34Copy pinpoint34. It was submitted that the Appellants filed the Lender’s Affidavit dated 16.08.2023 before the NCLAT and vide Para 8 of the Lender’s Affidavit, the Appellants agreed not to contest the issues relating to the grant of exclusion of time (granted by the Order of the NCLT dated 13.01.2023 and the NCLAT dated 26.05.2023) and the issue relating to the compliance with the Conditions Precedent. In the said affidavit, the Appellants also agreed to withdraw the Company Appeal pending before the NCLAT along with the Civil Appeal Nos. 4131-4134 of 2023 and Civil Appeal Nos. 3736-3737/2023 filed before this Court. However, this would be subject to the fulfilment of the three conditions imposed vide Para 8 by the SRA. The conditions were that – firstly, the SRA infuses an amount of Rs. 350 Crore by 31.08.2023 i.e., the date by which the said payment is to be made as per the Resolution Plan read with order dated 26.05.2023 passed by the NCLAT; secondly, the SRA undertakes to scrupulously follow the other terms and conditions of the Resolution Plan and; thirdly, the SRA complies with the liabilities in relation to the payment to be made to the employees as per the order of NCLAT dated 21.10.2022, which has been upheld by this Court vide order dated 30.01.2023

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35Copy pinpoint35. It was submitted that in terms of Serial No. 11 under Clause 7.7.1 read with Clause 6.1.3(g), the SRA had to infuse cash amounting to Rs 350 Crore and it was for this reason alone that Para 8(a) of the Lender’s Affidavit refers specifically to the infusion of Rs. 350 crore in cash by 31.08.2023. It was reiterated that the first tranche payment had to necessarily be made in cash since such a requirement flows from the Resolution Plan. It was not open to the SRA to contend that the Resolution Plan had a different mode of payment namely, the payment of Rs. 200 Crore in cash and Rs. 150 Crore by way of adjusting the PBG. The learned ASG contended that none of the clauses in the Resolution Plan stipulates such condition. To the contrary, under Clause 6.4.4, the PBG could be released or adjusted only upon the satisfaction of the twin requirements abovementioned. Therefore, the assumption by the Respondent that the infusion of Rs. 350 Crore emanates only out of the Lender’s Affidavit dated 16.08.2023, is totally incorrect. The Lender’s Affidavit has not and cannot impose any condition over and above those which are provided under the Resolution Plan. The Lender’s Affidavit was filed to only set out a deadline for infusing Rs. 350 Crore by 31.08.2023, which was subsequently extended by the order dated 28.08.2023 of the NCLAT to 30.09.2023. The Lender’s Affidavit only insisted on compliance with payment obligations within specified timelines and neither did it alter the Resolution Plan nor lay out new conditions.

36Copy pinpoint36. The NCLAT in its order dated 28.08.2023 fell in error in allowing the adjustment of PBG of Rs. 150 Crore as a part of the first tranche payment. This is evident from the order of this Court dated 18.01.2024, specifically under Para 21, wherein it was held that an infusion of Rs. 350 Crore would only mean an infusion by cash and the same could not be substituted for the adjustment of PBG. This Court, further, under Para 25 directed that a failure to make this payment on or before 31.01.2024 would necessitate the consequences under the Resolution Plan to follow. This Court further issued a direction that the NCLAT shall decide whether the SRA had been compliant with all the conditions contained in the Resolution Plan as well as the conditions in Clause 8 of the Affidavit dated 16.08.2023. This Court made it clear that the non-infusion of Rs. 150 Crore in cash would lead to consequences both in terms of the Affidavit and also the Resolution Plan since the condition insofar as infusion was concerned, remained the same both in the Affidavit and in the Resolution Plan. Therefore,

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the observation of the NCLAT in the impugned order holding that the consequences of non-deposit of Rs. 350 Crore was that “the SRA was not entitled to take any benefit of the offer” is contrary to the Resolution Plan and the order of this Court dated 18.01.2024.

37Copy pinpoint37. This Court had directed a cash payment of Rs. 150 Crore on or before 31.01.2024 and the SRA had admittedly failed to remit the same. Realizing that this would lead to the initiation of the consequences under the Resolution Plan, Respondent No.1 had applied for an extension before this Court which was declined outright as being misconceived vide order dated 02.02.2024. Therefore, the SRA having failed to make the payment and having breached this Court’s order dated 18.01.2024, the NCLAT ought to have concluded that the Resolution Plan had failed.

38Copy pinpoint38. In the alternative, the ASG argued that, assuming without admitting that the non-compliance of this Court’s Judgement dated 18.01.2024 would only have the consequence of bringing a closure to the offer made in the Lender’s Affidavit dated 16.08.2023 and not have any effect on the Appeal that was pending before the NCLAT, the NCLAT while passing it’s final order dated 12.03.2024 ought to have insisted on the payment of Rs. 150 Crore in cash. That would have been in tune with the specific direction that was issued by this Court & the intent with which the direction was issued, and the SRA having not paid the same, had committed a breach of the Resolution Plan. The NCLAT went to the extent of swapping the conditions laid out in the Resolution Plan by directing the adjustment of the PBG first and the execution of the mortgage on the three Dubai properties later i.e., within 30 days from its order dated 12.03.2024. It was submitted that even the extension that was allowed for the execution of mortgage expired on 11.04.2024 and the SRA continues to be a defaulter in this regard as well.

39Copy pinpoint39. The ASG vehemently contended that, there has been a triple breach on the part of SRA – Firstly, breach of the Resolution Plan; secondly, violation of the directions issued by this Court dated 18.01.2024 and; thirdly, the failure to execute the mortgage of the three Dubai properties before 11.04.2024.

40Copy pinpoint40. The ASG submitted that the impugned order of the NCLAT dated 12.03.2024 at Para 129, granted 30 days’ time to the SRA for the creation of charge over the Dubai properties and directed the SRA

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to bear all the necessary expenses. It was submitted that there was complete inaction on the part of the SRA for 29 days from the date of the impugned order and on 10.04.2024 at 16:38 hours, the SRA sent an email stating that they are willing to proceed with the security creation of the Dubai properties and also informed that since its value had reduced by Rs. 14 Crore, they would bridge the gap with an additional property or a cash security. On the same date, another email was sent by the SRA at 17:18 hours stating that an account balance of Rs. 76.07 Lakh is available with the Appellants and the same may be used to execute the mortgage. The ASG submitted that the Appellants replied to the said communication on the same day at 19:18 hours stating that: (a) The assenting financial creditors on 13.10.2023 have appointed Mashreq Bank to act as the agent for creation of the mortgage in terms of the prevailing law in Dubai and the necessary amount required to be paid to them had not yet been received. (b) After the impugned order of the NCLAT came to be passed on 12.03.2024, the Appellants sent an email on 22.03.2024 regarding the cost for the creation of a mortgage over the properties located in Dubai, which had not been paid till date. (c) That, instead of remitting the amount for creation of security as already advised, the SRA was sending an email that it had “no objection with the MC lenders immediately proceeding with the security creation of the Dubai properties”. (d) It was also brought to the notice of the SRA that 11.04.2024 would be the last date for complying with the impugned order of the NCLAT and that the SRA was well aware of the fact that the cost of creation of securities is Rs. 2,36,00,767 and not Rs. 76.07 lakh. This shows the SRA’s clear disinclination to execute the mortgage. It was further brought to the SRA’s notice that they had failed to comply with the Resolution Plan and the impugned order of the NCLAT dated 12.03.2024. Further, on the same day, at 21:05 hours, the SRA sent an email referring to 12 acres of contiguous land situated in Aligarh, Uttar Pradesh which had been valued in excess of Rs. 250 Crore, owned by a reputed individual entrepreneur resident in India and that the SRA was ready to offer this property as an alternative security in

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India. The Appellants replied to the said email on 16.04.2024 and stated that the period of 30 days had already expired on 11.04.2024, the expenses for creation of charge had not been paid and that accepting the property in India which belongs to a third party would tantamount to modification of the Resolution Plan.

41Copy pinpoint41. The ASG therefore submitted that the above exchanges patently bring out the SRA’s non-cooperation, defiance to judicial orders and desperate attempts to suggest the creation of security of unknown third-party properties, all of which were done after the expiry of the time period of 30 days provided by the NCLAT for compliance with their order dated 12.03.2024. Consequently, even in terms of the impugned Order of the NCLAT, there has been a total breach on the part of the SRA which only indicates that they have no inclination worth the name to implement the Resolution Plan. Consequently, in terms of Clause 9.4 of the Resolution Plan and Clause 3.13.7(iii) of the RFRP respectively, the Appellants are entitled to invoke the PBG automatically without any reference to the SRA.

ii. Issue No. 2: Non-payment of Airport dues

42Copy pinpoint42. It was submitted that in terms of Clause 6.3.1(d), the airport dues and parking charges are to be paid by the SRA upfront in priority over any other payment to the creditors of the Corporate Debtor. Clause 6.4.1(f) provides that on 31.08.2020, an approximate figure of Rs 240 Crore towards parking charges for aircrafts and airport space lease charges was arrived at through the estimate given by the RP and this was subject to a maximum of Rs. 475 Crore. Specific attention was drawn to the expression in Clause 6.3.1(d) which states that “such payments will be settled upfront in full in first 180 days from the effective date and without any conditions (including not being staggered payments spread across a period of time) so that flying can start immediately without any future disputes and concerns with such claimants for past dues”. The respondents, however, have not remitted any amount towards the airport dues nor have they allowed the Resolution Plan to be implemented. As a result of the several extensions/exclusions given by the NCLT and NCLAT to the SRA, the airport dues as on date stand at a staggering figure of Rs. 1100 Crore approx., which amount, again, is to be paid by the respondents alone.

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43Copy pinpoint43. The ASG submitted that, when the aforesaid is the position in the Resolution Plan, the NCLAT in its impugned order dated 12.03.2024 vide Paras 53-55 respectively has chosen to restrict the Airport dues to a mere Rs. 25 Crore and has erroneously construed it to be a part of the CIRP cost. The counsel drew specific attention to Para 53 of the impugned order wherein the NCLAT had referred to Clause 6.4.1(h) and stated that “…CIRP cost of the Corporate Debtor (excluding parking charges, rental charges, employees dues, taxes etc.) Accordingly, the Resolution Applicant has set aside a sum of Rs 25 crores as CIRP cost towards payment of any such cost until the approval date…”. Thus, despite the fact that Clause 6.4.1(h) on treatment of Outstanding CIRP Costs excludes the parking charges, rental charges, employees’ dues, taxes etc., the NCLAT has surprisingly read the same to mean as “inclusive of/included in” the CIRP costs while directing the payment of a mere Rs. 25 Crore. Therefore, this is an error apparent on the face of it which requires interference by this Court.

44Copy pinpoint44. It was submitted that, in case the argument of the SRA that a maximum of only Rs. 475 Crore is to be paid by the SRA under the Resolution Plan, is accepted, then the entire amount of Rs. 475 Crore shall go towards the airport dues and as a consequence, nothing would become payable to the financial creditors, operational creditors, workmen etc. The amount of Rs. 240 Crore was a mere estimate of the dues payable in the year 2020. Due to non-payment and non- commencement of flying operations, the same amount in the year 2024 has increased multi-fold. To contend that such an increased amount does not fall under the Resolution Plan and therefore, is not payable, will cast a further burden on the CoC of the Corporate Debtor. Further, it would be unfair to accept that, for the reason of the Respondent’s default in payment, the CoC would have to bear the Airport dues of Rs. 1100 Crore and none of the creditors or workmen would get anything out of this plan. This misconceived contention which intentionally makes the plan unworkable needs to be outrightly rejected.

iii. Issue No. 3: Non-payment of Workmen and Employees’ dues

45Copy pinpoint45. The ASG submitted that the Resolution Plan originally provides for a sum of Rs. 52 Crore towards the payment of workmen’s and employees’ dues. However, the NCLAT vide its order dated

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21.10.2022, in Para 78, had increased the same to Rs. 289.2 Crore which now stands modified to about Rs. 226 Crore. The NCLAT in the order dated 21.10.2022 under Para 80 had observed in unambiguous terms that “the workmen are entitled to full payment of provident fund and gratuity, hence the balance of above dues ought to be paid by the SRA to satisfy statutory obligations. Non-payment of full provident fund and gratuity shall lead to violation of Section 30(2)(e) and hence, to save the Plan the above payments have to be made”. This view of the NCLAT had also been upheld by this Court vide its order dated 30.01.2023. The Resolution Plan under Clause 6.3.1(c) obligates the payment of such dues within 180 days from the Effective Date.

46Copy pinpoint46. It was submitted that, the NCLAT, vide Paras 111-114 had erroneously directed the payment of an amount of Rs. 12 Crore towards the Provident Fund and has completely ignored the payment of dues pertaining to gratuity of the workmen and employees. The Appellants contend that this finding is not only an error apparent but completely inconsistent with the NCLAT’s own earlier order dated 21.10.2022, which stood upheld by this Court on 31.01.2023.

iv. Issue No. 4: Achievement of Effective Date

47Copy pinpoint47. It was submitted that Clause 7.6.2 of the Resolution Plan provided that the date of fulfilment of all the Conditions Precedent as stated in Clause 7.6.1, shall be the Effective Date for the purposes of the Resolution Plan. A failure to fulfill the Conditions Precedent within 270 days of the Approval Date would lead to an automatic withdrawal of the Resolution Plan as per Clause 7.6.4. However, the NCLT, vide its order dated 22.06.2021, expressed its opinion that there was uncertainty with respect to the achievement of the Effective Date under the Resolution Plan and therefore, modified Clause 7.6.4. As a consequence, it fixed the Effective Date to be the 90th day from the Approval Date of 22.06.2021 and stated that this could be extended for a maximum period of another 180 days. The Effective Date, therefore, became 22.09.2021 i.e., 90 days from 22.06.2021. Subsequently, three extensions were given to the SRA with respect to the achievement of the Effective Date – First, vide order dated 29.09.2021, the NCLT extended it to 22.12.2021; Secondly, vide order dated 20.01.2022, the NCLT extended to 22.03.2022 through which the maximum extension of 270 days that

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could be provided under the Resolution Plan had been reached and; Thirdly, vide order dated 11.04.2022, the NCLT further extended it to 25.05.2022 by excluding a period of 65 days spent in moving the application for grant of time. Therefore, the Effective Date was finally frozen on 25.05.2022.

48Copy pinpoint48. The learned ASG submitted that the SRA, however, contended that the Effective Date had been achieved on 20.05.2022 and the same was accepted by the NCLT in its order dated 13.01.2023. Therefore, the calculation of 180 days for the infusion of the First Tranche Payment begins from 20.05.2022. The initial 180 days had expired on 16.11.2022. However, several extensions were given to the SRA for infusion of the first tranche payment – Firstly, vide order dated 13.01.2023, the NCLT extended the timeline for infusion of First Tranche Payment till 15.05.2023; Secondly, vide order dated 26.05.2023, the NCLAT further extended the timeline of 180 days till 31.08.2023; Thirdly, vide order dated 28.08.2023, the NCLAT extended the timeline of 180 days till 30.09.2023 and; Fourthly, vide Order dated 18.01.2024, this Court extended the time of 180 days for infusion till 31.01.2024.

49Copy pinpoint49. The learned ASG highlighted that Respondent No.1 had failed to make the first tranche payment of Rs. 350 Crore, airport dues of Rs. 475 Crore and the workmen’s and employees’ dues of Rs. 226 Crore within the initial 180 days from the Effective Date as well as within the multiple extensions granted by the NCLT, NCLAT and this Court. The ASG submitted that multiple extensions and accommodations have already been granted to the SRA for implementation of the Resolution Plan. Therefore, it is too late in the day to claim that the non-infusion of Rs. 150 Crore to complete the first tranche payment of Rs. 350 Crore is only a breach of the Lender’s Affidavit dated 16.08.2023 and not the Resolution Plan. The same needs to be rejected outrightly.

v. Issue No. 5: Non-fulfilment of Conditions Precedent

50Copy pinpoint50. The ASG submitted that the respondents have failed to comply with 3 Conditions Precedent, specifically under Clauses 7.6.1(a), (c) and (d) of the Resolution Plan respectively.

51Copy pinpoint51. It was submitted that Clause 7.6.1 (a) requires the SRA to obtain an AOC which has to be validated by the DGCA and the Ministry

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of Civil Aviation (hereinafter, “MoCA”). The Respondent possessed an AOC on 20.05.2022 i.e., the Effective Date as contended by the SRA. The validity of the AOC was further extended by the DGCA on 27.07.2023 up to 03.09.2023 subject to certain conditions. It was clearly stated that the extension is only for the limited purpose of completing the ongoing CIRP process and the Corporate Debtor would be required to undergo fresh re-certification in accordance with the prescribed procedure for issuance of an AOC and also submit a firm action plan for the revival of its operations. The AOC expired on 03.09.2023 and the same was never extended by the SRA.

52Copy pinpoint52. It was submitted that the NCLT in its order dated 13.01.2023 had recorded a finding that the Condition Precedent with respect to the AOC was fulfilled but it must be noted that this was an observation made during a time when the SRA had a valid subsisting AOC, which subsequently expired.

53Copy pinpoint53. It was further submitted that vide letter dated 26.12.2023, the Director General of Civil Aviation confirmed that no further extension of the AOC was granted to the Corporate Debtor beyond 03.09.2023. The NCLAT in its impugned order dated 12.03.2024 required the SRA to submit an application for re-issuance of the AOC within 90 days from the date of its order and the deadline for the same had expired on 12.06.2024. It was submitted that, even today, the Respondents do not have a valid AOC and the fact that the Respondents are contending that they had not renewed the AOC solely because of the matter being under litigation, only exposes their disinterest and disinclination in taking their obligations forward.

54Copy pinpoint54. It was then submitted that Clause 7.6.1(c) requires the SRA to obtain Slot Allotment Approval. The NCLT in its order dated 13.01.2023 vide para 124 had clearly rendered a finding that “there is no dispute that slots for which SRA applied were granted to them by the concerned competent authority including the slots in Delhi and Mumbai on settling the old dues and as such, it cannot be considered as non-allotment of slots, as SRA has received the slots it requested for in compliance with the plan approval order.” The ASG also referred to the email dated 27.06.2022 issued by MAIL and the same reads as under: “We are happy to consider your request for slots on parking bay during the ongoing summer schedule. The same is subject to the closure

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of ongoing discussions pertaining to settlement of outstanding dues of jet airways towards MAIL.”

55Copy pinpoint55. While the NCLT had correctly recorded a finding that the slot allotment is subject to the payment of airport dues (which the Respondents had not paid even today), the NCLAT vide para 50 and Para 55 erroneously concluded that “the adjudicating authority has rightly observed that settling of old dues cannot be considered as non- allotment of slots” and therefore condition 7.6.1(c) stands fulfilled. This finding is contrary to the finding recorded by NCLT and the Resolution Plan and as a consequence, the Respondents could be said to have breached this condition precedent as well.

56Copy pinpoint56. The ASG submitted that Clause 7.6.1(d) requires the SRA to obtain the International Traffic Rights Clearance. The NCLT, vide Para 125, had righty held that “the international traffic rights clearance is required to be obtained in compliance with the applicable laws which stipulates that minimum 20 aircrafts are required to be deployed before applying for such clearance”. However, after holding so, the NCLT proceeded to conclude that this condition cannot be satisfied upfront and can be fulfilled only when the operations have recommenced successfully and that, therefore, this condition precedent stood fulfilled. In simple terms, the NCLT could be said to have modified a condition precedent to a condition subsequent and this view of the NCLT has been upheld by the NCLAT in Paras 56 to 58. These findings are in clear contradiction to the express stipulation in the Resolution Plan and therefore, this condition too stands breached by the respondents.

57Copy pinpoint57. One more aspect that the learned ASG highlighted through his submissions was that, the Circular F.No.AV.14027/17/2018-AT-1 issued by the Office of Director General of Civil Aviation provides certain requirements for undertaking aerial work. Para 6 of the said Circular deals with Security Clearance and the same requires the Applicant or Company and its Board of Directors to obtain Security Clearance from the Ministry of Home Affairs (MHA) if they are foreign nationals. It was submitted that according to the communications dated 09.07.2024 issued by the Ministry of Civil Aviation, it had been confirmed that Security Clearance had not been conveyed in respect of Mr. Florian Fritsch. Hence, the threshold requirement of security clearance has not yet been obtained by one of the Resolution

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Applicants, who according to Clause 2.1.4 of the Resolution Plan, is the other partner to the Consortium along with Mr. Murari Lal Jalan. The ASG also placed reliance on news items which suggested that Mr. Florian Fritsch is facing money laundering proceedings in three different jurisdictions. The same had been dealt with by the NCLAT summarily in its impugned order in Para 125. However, it was wrongly concluded that this was yet another attempt by the Appellants to create roadblocks in the process of implementation of the Resolution Plan.

58Copy pinpoint58. The counsel finally submitted that, since the Airport Dues and the CIRP costs have substantially increased solely on account of the delay, the Court should invoke its powers under Article 142 of the Constitution of India and direct that the Corporate Debtor be sent to liquidation.

C. SUBMISSIONS ON BEHALF OF THE RESPONDENTS

59Copy pinpoint59. On the other hand, Mr. Mukul Rohatgi, learned senior counsel appearing on behalf of Respondent No.1 submitted that Section 62 of the IBC, 2016 requires an appeal to the Supreme Court from an order of the NCLAT to be on a “question of law”. He submitted that the present appeal only seeks to challenge the concurrent findings of fact recorded by the NCLT and the NCLAT, with regard to compliance of the Conditions Precedent by the SRA and does not bring out any question of law. To fortify this submission, the counsel placed reliance on the decision of this Court in IFCI Ltd. v. Sutanu Sinha and Others reported in 2023 SCC OnLine SC 1529.

60Copy pinpoint60. The counsel submitted that the directions issued by this Court vide order dated 18.01.2024 were interim and not final. The appeals which were decided by this Court arose out of an interlocutory application which was filed by the SRA seeking directions from the NCLAT on the mode of satisfying the conditions in the Lender’s Affidavit dated 16.08.2023. It was submitted that the same is evident from a reading of Para 19 which reads that “.. Observations in the present judgment are confined to the arrangement which must operate during the pendency of the appeal without the court expressing a final view on merits of the appeal, which will fall for consideration before the NCLAT”. Further, Para 21 of the same order stated that, “…The impugned order of the NCLAT, on the other hand, allowed the plea

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of the SRA for adjustment and consequential release of the PBG at the interlocutory stage. This prima facie would not be in accordance with the tenor of paragraph 8 of the affidavit…”. Therefore, it was submitted that the directions issued by this Court only related to a scenario were the SRA sought benefit of the offer made in the Lender’s Affidavit.

61Copy pinpoint61. The counsel submitted that the NCLAT in its impugned order dealt with this Court’s order dated 18.01.2024 at length and concluded that the direction issued by this Court to deposit the amount of Rs. 150 Crore peremptorily on or before 31.01.2024 was in reference to the Lender’s Affidavit dated 16.08.2023. Meaning thereby, the order of the NCLAT dated 28.08.2023 to adjust the PBG of Rs. 150 Crore was substituted by the direction of the Supreme Court. Therefore, the SRA would render itself disentitled to take benefit of the offer of the Appellant that they would withdraw the Company Appeal and the appeals before the Supreme Court. As such, the pending Company Appeal was to be heard on merits and decided in accordance with law by the NCLAT. In short, the entire issue before this Court was confined to an interpretation as to how the condition of Rs. 150 Crore in the affidavit was to be interpreted and if the condition was complied with, the Appeals would stand withdrawn, if not, they would be decided on their own merits.

62Copy pinpoint62. It was further submitted that the NCLAT rightly observed that, the submission of the Appellant that the Corporate Debtor should be directed to be liquidated on account of non-deposit of Rs. 150 Crore, cannot be accepted since the Supreme Court neither considered nor expressed any opinion on the question of liquidation. Liquidation was never recorded as a consequence and this is evident from liquidation not being mentioned in; (a) the arguments of the Appellants recorded by the NCLAT in its order dated 28.08.2023, (b) the judgment of the NCLAT dated 28.08.2023, (c) the arguments of the Appellants recorded by this Court in its order dated 18.01.2024 and, the findings or the directions of this Court in its order dated 18.01.2024.

63Copy pinpoint63. The counsel also submitted that the adjustment of the PBG against the first tranche payment was possible under the Resolution Plan, specifically under Clause 6.4.4 which sets out the “Summary of payments and security package”. It is evident through Clause 6.4.4 that a revolving package was agreed against each tranche of the

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payment under the Resolution Plan. For the first tranche of payment, the security package comprises of the PBG and one of the Dubai Properties and it is stated that the PBG will be adjusted against the first tranche payment. For subsequent tranches of payment, the security package does not include the PBG and instead includes other types of security. It was submitted that the Lenders are relying on the RFRP to claim that no adjustment of the PBG was possible. However, the RFRP is only a wish list of the CoC which was informed to the applicants at the time of inviting plans. Therefore, it cannot override a negotiated and approved provision of the Resolution Plan. This is precisely why the approved Resolution Plans often deviate from the RFRP.

64Copy pinpoint64. The counsel submitted that according to Clause 6.4.4 of the Resolution Plan, the Balance Security is in the form of immovable properties located in Dubai and since they are located outside India, the approval of the RBI was necessary for the creation of security. The security on the Dubai properties of the SRA was to be created on the Effective Date, i.e., 20.05.2022. On 21.05.2022, a day after the Effective Date, the SBI had applied for the approval and the same was received on 22.07.2022.

65Copy pinpoint65. It was submitted that, on 03.02.2023 the SRA had shared drafts of the transaction documents required for the creation of security. However, no comments were received from the Appellants. It is the case of the SRA that the Appellants did not reply to the reminder emails sent between the months of May and October 2023 and this issue was also discussed during the 37th MC Meeting dated 09.10.2023. However, after more than a year of sharing the transaction documents, the Appellants sent their comments on the same on 08.04.2024 i.e., three days before the expiry of the 30-day timeline given under the impugned order of the NCLAT.

66Copy pinpoint66. It was further submitted that, only in the 42nd MC Meeting that took place on 02.04.2024 the SRA was informed for the first time that, as per the recent valuation, the valuation of the Balance Security worked out at Rs. 236 Crore and that there was a shortfall of Rs. 14 Crores. In the same meeting, the SRA suggested that a property in India valued at Rs. 250 Crore could be provided as an alternate security. Vide email dated 10.04.2024, the SRA provided details of the alternate security equivalent to Rs. 250 Crore in India. However, the

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Appellants responded to the above vide their email dated 16.04.2024 stating that providing an alternate security would tantamount to modification of the Resolution Plan.

67Copy pinpoint67. The counsel submitted that the SRA, vide email dated 16.04.2024 conveyed that they had not received any invoice from Mashreq Bank towards payment of their costs for acting as an agent for security creation and that the payment of security related costs to the extent of Rs. 76 Lakh could be done from the existing deposit with the Appellants. For the balance amounts, they requested that the invoices be shared with the SRA and that the same would be processed immediately. On 20.04.2024 and 01.05.2024 respectively, the SRA reminded the Appellants to share the invoices for the purpose of security creation.

68Copy pinpoint68. On the issue of security creation, the counsel summed up submitting that the SRA had done everything within its control to enable the Appellants to create security including agreeing to bear all costs and expenses for creation and preservation of security, providing contracts for such security creation, and providing title documents of all the immovable properties to the Appellants. Therefore, the contention that the SRA failed to create Balance Security is factually incorrect.

69Copy pinpoint69. With respect to the payment of the Airport Dues, it was submitted that, the Resolution Plan provides for the adjustment of CIRP dues from the positive cash balance of the Corporate Debtor and then from the share of the Lenders. The Appellants’ own case is that the Airport Dues amount to Rs. 1000 Crore approximately. Therefore, as per the Resolution Plan, Rs. 400 Crore approx. is payable towards the airport dues, first, from the positive cash balance of the Corporate Debtor and if that is insufficient, then from the Lenders’ share being CIRP Dues. Finally, the remaining Rs. 600 Crore would be borne by the SRA

70Copy pinpoint70. As regards the payment of Provident Fund and Gratuity to the workmen and employees, it was submitted that the NCLAT did not waive off the liability of the SRA towards the payment of PF and Gratuity. On the contrary, for the implementation of the same, the NCLAT had provided timelines for making such payments in compliance with the applicable laws. It was further submitted that in the 42nd MC meeting held on 02.04.2024, the SRA undertook to make the payment towards the dues of PF and gratuity and the Appellants are aware of the same.

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71Copy pinpoint71. The counsel submitted that there are concurrent findings on the fulfillment of Conditions Precedent vide the order of the NCLT dated 13.01.2023 and the impugned order of the NCLAT dated 12.03.2024. Clause 7.6.1 of the Resolution Plan sets out five Conditions Precedent. It was submitted that two of the five Conditions Precedent were “admittedly complied” with. On the remaining three, both the Tribunals have rendered concurrent findings, which ought not to be interfered with in an appeal under Section 62 of the IBC, 2016, which is effectively a Second Appeal.

72Copy pinpoint72. The counsel submitted that the SRA cannot suo moto infuse funds into the Corporate Debtor since such infusion necessarily requires steps/actions to be taken by the Appellants and the Corporate Debtor acting through the MC. These steps include the appointment of directors on the board of the Corporate Debtor and seeking in-principal approval from the relevant stock exchanges under the SEBI LODR Regulations by the Corporate Debtor. However, despite constantly following up with the Appellants, the same has not been received yet and therefore, they have not allowed the SRA to undertake such a funding.

73Copy pinpoint73. The Counsel submitted that the first Condition Precedent is the Validation of AOC by DGCA and MoCA as provided under Clause 7.6.1(a). The SRA had a valid AOC until 03.09.2023 and the lapse of the AOC during the pendency of the appeals cannot mean that the Condition Precedent was not met. It was submitted that the condition was met on the date of the implementation application being filed before the NCLT and that the AOC has not been renewed only due to the fault of the Appellants.

74Copy pinpoint74. It was submitted that the third Condition Precedent was the requirement of Slot Allotment Approval as provided under Clause 7.6.1(c). The counsel rejected the contention of the Appellants that the slots were not provided because the airport charges were not paid and stated that the airport charges are a part of the CIRP costs which could be met as and when the Resolution Plan was operationalized. It was further submitted that the SRA had obtained 48 slots on the Effective Date when it was supposed to secure only 46 slots. The NCLT in its order dated 21.06.2022 had also held that it was not possible for the SRA to obtain the slots that were historically available to the Corporate Debtor. Therefore, this Condition Precedent has also been met.

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75Copy pinpoint75. The counsel submitted that the fourth Condition Precedent related to obtaining the International Traffic Right Clearance as stated under Clause 7.6.1(d) of the Resolution Plan. This Condition Precedent had to be satisfied in accordance with the “applicable laws”. Upon applying for the Clearance, the MoCA had informed the SRA that, Clause 8(b) of the National Civil Aviation Policy, 2016 requires a minimum of 20 aircrafts to be deployed for domestic operations before applying for international clearance and that therefore, the same can be granted when 20 aircrafts of the Corporate Debtor are in operation. The Business Plan only envisages 6 aircrafts and the SRA can operationalize 20 aircrafts once the operations of the Corporate Debtor begin. This is evident from Clause 8.2.6(f) that states that the restart of international operations can be envisaged only after the completion of 12 months of operating the airline. Since this condition requires operations to re-commence before it can be satisfied, this Condition Precedent has also been complied with.

76Copy pinpoint76. Mr. Gopal Sankaranarayanan, learned senior counsel also appearing for the Respondents, concurred with all the aforesaid submissions made on behalf of the SRA. In addition to bringing our attention to Clause 6.4.4 on the issue of adjustment of the PBG, he also referred to Clause 6.4.12 of the Resolution Plan which stated that the PBG will bring financial flexibility for the SRA and help the SRA to advance the committed payments and achieve its goal of re-commencing the operations of the Corporate Debtor at the earliest.

77Copy pinpoint77. It was submitted that the NCLAT order dated 28.08.2023 rightly recognized that Regulation 36B(4A) of the 2016 Regulations only provides for the PBG requirement for the purposes of the RFRP and the same has been complied with by the SRA. Further, the counsel pointed out that Clause 6.4.4 (a)(i) elaborates on the “Committed Cash Payments” to be made to the Financial Creditors. In the table, under the heading “Date of release of Security”, the PBG of Rs. 150 Crore was not mentioned while the other two forms of security find a mention. Thus, the intention was that, the PBG be adjusted in making the first tranche payment.

78Copy pinpoint78. The counsel further submitted that there is no specific consequence provided under the Resolution Plan for a default in the creation of security. It was reiterated that the SRA had undertaken all possible steps to further the execution of the mortgage of the Dubai properties

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as per the Resolution Plan and it is the Appellants who have not cooperated in this regard.

79Copy pinpoint79. The counsel submitted that the Appellants have taken contradictory stances at different stages of the dispute before different forums. Before the NCLAT in its pending Company Appeal, it was contended by the Appellants that the NCLT had erroneously allowed the Resolution Plan to be implemented without the complete compliance of the Conditions Precedent by the SRA. However, before this Court, they have argued that the SRA has claimed that the Conditions Precedent were fulfilled on 20.05.2022 and has asserted that it would be the Effective Date. As a consequence, the SRA should have met with their first tranche payment obligations within 180 days from the Effective Date.

80Copy pinpoint80. The counsel submitted that the consequences of non-compliance with the Conditions Precedent were that the SRA would not be able to re-commence operations as an aviation company as stated in Clause 7.6.1 of the Resolution Plan. He also submitted that the Effective Date for the purposes of the Resolution Plan would only kick in upon the fulfillment of all the Conditions Precedents. The consequence of non-compliance with the Conditions Precedent would be that the Resolution Plan shall automatically stand withdrawn and upon, such withdrawal, the members of the SRA in the MC shall resign and the remaining members of the MC shall assume absolute control of the Corporate Debtor.

81Copy pinpoint81. Adding to the submissions as regards the Airport Dues, it was submitted that as per the estimates made by the RP, the airport dues i.e., the parking charges and airport space lease charges were Rs. 240 Crore and this was reflected in Clause 6.4.1(f) of the Resolution Plan. It was submitted that the dues accrued during the period of CIRP i.e., till the date of approval of the Resolution Plan, is a part of the CIRP costs and such payments have to be made within 170 days from the Effective Date as per Clause 6.4.1 of the Resolution Plan. As per Clause 6.4.1(h), a sum of Rs. 25 Crore was set aside for CIRP costs. However, it must be noted that Clause 6.4.1(m) allows the SRA to utilize the funds available with the Corporate Debtor for making payments of any portion of the CIRP costs. It was submitted that the Lenders rely on Clause 6.3.1(d) to state that the airport dues have to be settled upfront and not in staggered payments.

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However, Clause 6.3.1(d) is just a proposal and not a condition of the Resolution Plan.

82Copy pinpoint82. On workmen and employees’ dues, it was submitted that, as per Clause 6.4.2 on the “Summary of Financial Proposal” the amount demarcated for all the claims related to employees or workmen was Rs. 52 Crore and as per the Implementation Schedule, these claims were to be paid within 175 days from the Effective Date. However, the NCLAT vide its order dated 21.10.2022 increased it to Rs. 113 Crore since it was the minimum liquidation value that they were entitled to as per the estimates of the RP. The final directions issued by the NCLAT in the aforesaid order conveyed that the workmen and employees are entitled to the payment of unpaid PF and gratuity till the Insolvency Commencement Date and the RP was directed to compute such payment within 30 days. The RP had calculated such amounts to be Rs. 14 Crore towards PF and Rs. 188.7 Crore towards gratuity. It was submitted that neither the NCLAT order dated 21.10.2022 nor the order of this Court dated 30.01.2023 had provided any specific timelines for fulfillment of these additional liabilities which were cast upon the SRA. This is precisely why the SRA proposed to pay Rs. 14 Crore towards PF upfront in compliance with Section 11 of the PF Act and pay the Gratuity dues of Rs. 188.2 Crore in a staggered manner.

83Copy pinpoint83. The counsel finally referred to the letter dated 16.08.2024 sent by MoCA which provided Security Clearance in respect of a proposed Director of the Corporate Debtor, Mr. Swapnil Jain. The validity period of this Security Clearance was stated to be co-terminus with the validity period of the AOC which was issued by the DGCA.

D. ISSUES FOR DETERMINATION

84Copy pinpoint84. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the following questions of law fall for our consideration: - i. Whether the Performance Bank Guarantee (PBG) could have been adjusted against the first tranche payment which was to be made under the Resolution Plan, within 180 days from the Effective Date, in contravention of the order of this Court dated 18.01.2024, the terms of the Resolution Plan and the provisions of law? To put it in other words, whether the impugned order of

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the NCLAT allowing the adjustment of the Performance Bank Guarantee (PBG) in lieu of payment of the first tranche could be said to be perverse? ii. Whether the non-implementation of the Resolution Plan by the SRA necessarily leads to the consequence of liquidation as provided under Section 33(3) of the IBC, 2016? iii. Whether the timely implementation of the Resolution Plan is also one of the objectives of the IBC, 2016?

E. ANALYSIS

85Copy pinpoint85. Before we proceed to advert to the rival submissions canvassed on either side and the issues outlined above, we must look into the preliminary objection raised on behalf of the SRA i.e., that the scope of an appeal under Section 62 of the IBC must be restricted to a “question of law”. In this regard, reliance was placed on the decision of this Court in IFCI Ltd. v. Sutanu Sinha and Others reported in 2023 SCC OnLine SC 1529 which dealt with the issue as to whether compulsorily convertible debentures could be treated as a “debt” instead of an equity instrument, to submit that the jurisdiction under Section 62 is restricted to a question of law akin to a second appeal. The relevant observations are reproduced hereinbelow: “29. Last but not the least, we must also note that our jurisdiction comes from section 62 of the Code. The said section reads as under: “62. (1) Any person aggrieved by an order of the National Company Law Appellate Tribunal may file an appeal to the Supreme Court on a question of law arising out of such order under this Code within forty-five days from the date of receipt of such order”.

30. The jurisdiction is restricted to a question of law akin to a second appeal. The law does not envisage unlimited tiers of scrutiny and every tier of scrutiny has its own parameters. Thus, the lis inter se the parties has to be analysed within the four corners of the ambit of the statutory jurisdiction conferred on this court.

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31. We are thus of the view that the appeal does not raise any such question of law and that the findings of the courts below are in accordance with settled principles.” (emphasis supplied)

86Copy pinpoint86. Section 100 of the Code of Civil Procedure, 1908 is the provision related to a second appeal and it reads as thus: “100. Second appeal – (1) Save as otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie to the High Court from every decree passed in appeal by any Court subordinate to the High Court, if the High Court is satisfied that the case involves a substantial question of law. (2) An appeal may lie under this section from an appellate decree passed ex parte. (3) In an appeal under this section, the memorandum of appeal shall precisely state the substantial question of law involved in the appeal. (4)Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. (5)The appeal shall be heard on the question so formulated and the respondent shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question: Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law, not formulated by it, if it is satisfied that the case involves such question.” (emphasis supplied)

87Copy pinpoint87. This Court in Chandrabhan (Deceased) Through Lrs. And Others v. Saraswati and Others reported in 2022 SCC OnLine SC 1273 explained as to what constitutes a “substantial question of law” under Section 100 of the Code of Civil Procedure, 1908. The relevant observations made are reproduced hereinbelow:

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“33. The principles relating to Section 100 of the CPC relevant for this case may be summarised thus: (i) An inference of fact from the recitals or contents of a document is a question of fact. But the legal effect of the terms of a document is a question of law. Construction of a document involving the application of any principle of law, is also a question of law. Therefore, when there is misconstruction of a document or wrong application of a principle of law in construing a document, it gives rise to a question of law. (ii) The High Court should be satisfied that the case involves a substantial question of law, and not a mere question of law. A question of law having a material bearing on the decision of the case (that is, a question, answer to which affects the rights of parties to the suit) will be a substantial question of law, if it is not covered by any specific provisions of law or settled legal principle emerging from binding precedents and involves a debatable legal issue. A substantial question of law will also arise in a contrary situation, where the legal position is clear, either on account of express provisions of law or binding precedents, but the court below has decided the matter, either ignoring or acting contrary to such legal principle. In the second type of cases, the substantial question of law arises not because the law is still debatable, but because the decision rendered on a material question, violates the settled position of law. (iii) The general rule is that the High Court will not interfere with findings of facts arrived at by the courts below. But it is not an absolute rule. Some of the well-recognised exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have wrongly cast the burden of proof. When we refer to “decision based on no evidence”, it not only refers to cases where there is a total dearth of evidence, but also refers to any case, where the evidence, taken as a whole, is not reasonably capable of supporting the finding.” (emphasis supplied)

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This Court recapitulated that a substantial question of law would also arise in a situation where the legal position is clear, either on account of express provisions of law or binding precedents, but the Court below has ignored or acted contrary to such legal principles while deciding the matter. In such circumstance, the decision rendered by the Court below would violate a settled position of law and therefore, constitute a substantial question law. Furthermore, it was observed therein that it is not an absolute rule that the Court in a second appeal will not interfere with findings of fact. One of the well-recognized exceptions is where the Courts below have drawn wrong inferences from proved facts, by applying the law erroneously.

88Copy pinpoint88. In Maria Colaco and Another v. Alba Flora Herminda D’souza and Others reported in (2008) 5 SCC 268, it was held that in the second appeal under Section 100 CPC, the High Court should not interfere on the questions of fact. However, if on a scrutiny of the evidence, it is found that the finding recorded by the first appellate court is totally perverse then an interference is certainly possible in the matter as it constitutes a question of law. The relevant observations are reproduced hereinbelow: “7. The learned Single Judge after considering the matter found that these averments did not constitute the basis on the part of the plaintiff that he was not in possession of the suit property. On the contrary, the learned Single Judge found in reply to Para 13 of the plaint that the defendants in their written statement admitted that the work was stopped by Defendant 1 for some time but they restarted the work again. This, according to the learned Single Judge was a proof of the fact that Defendants 1 and 2 and Defendant 3 were not sure about the possession and right of Defendants 1 and 2 over the property. In fact, what transpires from all these facts is that the trial court reached the same conclusion as the learned Single Judge in second appeal in the High Court. It is true normally that in the second appeal the High Court should not interfere on the questions of fact. But if on the scrutiny of the evidence it is found that the finding recorded by the first appellate court is totally perverse then certainly the High Court can interfere in the matter as it constitutes the question of law.” (emphasis supplied)

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89Copy pinpoint89. In Abdul Raheem v. Karnataka Electricity Board and Others reported in (2007) 14 SCC 138, the Court acknowledged that the High Court’s jurisdiction in terms of Section 100 is limited. Having said so, it was also observed that a consideration of irrelevant facts, non-consideration of relevant facts and a finding of fact arrived at by overlooking vital documents would also give rise to a substantial question of law. The relevant observations are reproduced hereinbelow: “10. A substantial question of law ordinarily would not arise from the finding of facts arrived at by the trial court and the first appellate court. The High Court’s jurisdiction in terms of Section 100 of the Code is undoubtedly limited.

11. The question as to whether the plaintiff was ready and willing to perform its part of contract by itself may not give rise to a substantial question of law. Substantial question of law should admittedly be formulated relying on or on the basis of findings of fact arrived at by the trial court and the first appellate court.

12. However, there cannot be any doubt whatsoever that consideration of irrelevant fact and non-consideration of relevant fact would give rise to a substantial question of law. Reversal of a finding of fact arrived at by the first appellate court ignoring vital documents may also lead to a substantial question of law. In Vidhyadhar v. Manikrao [(1999) 3 SCC 573] this Court held : (SCC p. 586, para 23) “23. The findings of fact concurrently recorded by the trial court as also by the lower appellate court could not have been legally upset by the High Court in a second appeal under Section 100 CPC unless it was shown that the findings were perverse, being based on no evidence or that on the evidence on record, no reasonable person could have come to that conclusion.” (See also Iswar Bhai C. Patel v. Harihar Behera [(1999) 3 SCC 457] .)

14. We may, however, notice a few decisions in regard to the jurisdiction of the High Court under Section 100

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of the Code. In Commr. of Customs (Preventive) v. Vijay Dasharath Patel [(2007) 4 SCC 118] this Court held : (SCC p. 128, paras 22-26) “22. We are not oblivious of the fact that the High Court’s jurisdiction in this behalf is limited. What would be substantial question of law, however, would vary from case to case.

23. Moreover, although, a finding of fact can be interfered with when it is perverse, but, it is also trite that where the courts below have ignored the weight of preponderating circumstances and allowed the judgment to be influenced by inconsequential matters, the High Court would be justified in considering the matter and in coming to its own independent conclusion. (See Madan Lal v. Gopi [(1980) 4 SCC 255] .)

24. The High Court shall also be entitled to opine that a substantial question of law arises for its consideration when material and relevant facts have been ignored and legal principles have not been applied in appreciating the evidence. Arriving at a decision, upon taking into consideration irrelevant factors, would also give rise to a substantial question of law. It may, however, be different that only on the same set of facts the higher court takes a different view. (See Collector of Customs v. Swastic Woollens (P) Ltd. [1988 Supp SCC 796 : 1989 SCC (Tax) 67] and Metroark Ltd. v. CCE [(2004) 12 SCC 505] .)

25. Even in a case where evidence is misread, the High Court would have power to interfere. (See W.B. Electricity Regulatory Commission v. CESC Ltd. [(2002) 8 SCC 715] and also Commr. of Customs v. Bureau Veritas [(2005) 3 SCC 265] .)

26. In Dutta Cycle Stores v. Gita Devi Sultania [(1990) 1 SCC 586] this Court held : (SCC p. 587, para 4) ‘4. Whether or not rent for the two months in question had been duly paid by the defendants

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is a question of fact, and with a finding of such fact, this Court does not ordinarily interfere in proceedings under Article 136 of the Constitution, particularly when all the courts below reached the same conclusion. But where the finding of fact is based on no evidence or opposed to the totality of evidence and contrary to the rational conclusion to which the state of evidence must reasonably lead, then this Court will in the exercise of its discretion intervene to prevent miscarriage of justice.’ (See also P. Chandrasekharan v. S. Kanakarajan [(2007) 5 SCC 669] .)”. (emphasis supplied)

Therefore, what would constitute a substantial question of law would differ in each case. When material and relevant facts have been ignored and legal principles have not been applied while appreciating the evidence, a substantial question of law can be said to have arisen. Additionally, even in a case where evidence is misread, the power to interfere under Section 100 would exist.

90Copy pinpoint90. In our considered view the impugned order of the NCLAT directing the SRA to adjust the PBG of Rs. 150 Crore against the first tranche payment of Rs. 350 Crore was in flagrant disregard of the order of this Court dated 18.01.2023, the terms of the Resolution Plan and established law. Such an order was perverse for having not properly considered several material and relevant facts and misreading evidence as well. Furthermore, the non-infusion and payment of funds in compliance with the applicable laws and the terms of the Resolution Plan had led to circumstances causing a failure of the Resolution Plan. We have no doubt in our mind that the NCLAT acted contrary to the settled legal principles and went to the extent of drawing wrong inferences from proved facts while deciding the matter. This itself justifies the examination of various issues in exercise of the jurisdiction afforded to us under Section 62 of the IBC, 2016. i. Whether the Performance Bank Guarantee (PBG) could have been adjusted against the first tranche payment which was to be made under the Resolution Plan, within 180 days

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from the Effective Date, in contravention of the order of this Court dated 18.01.2024, the terms of the Resolution Plan and the provisions of law?

a. Whether the Conditions Precedent were fulfilled by Respondent No.1/SRA and the Effective Date was fixed at 20.05.2022?

91Copy pinpoint91. Clause 7.6.1 of the Resolution Plan details five Conditions Precedent that have to be fulfilled by the SRA. They are: - (a) Validation of AOC, (b) Approval of Business Plan, (c) Slot Allotment Approval, (d) International Traffic Rights Clearance, and (e) Demerger of AGSL. Of the five Conditions Precedent that find mention under Clause 7.6.1 of the Resolution Plan, the Appellants have only disputed the fulfilment of three Conditions Precedent i.e., Validation of AOC, Slots Allotment Approval and International Traffic Rights Clearance. According to Clause 7.6.2 of the Resolution Plan, the date of fulfillment of all the Conditions Precedent as stated in Clause 7.6.1 would be the Effective Date for the purposes of the Resolution Plan. A failure to fulfil the Conditions Precedent within a maximum of 270 days from the date of approval of the Resolution Plan would lead to an automatic withdrawal of the Resolution Plan as per Clause 7.6.4.

92Copy pinpoint92. On 22.06.2021, the NCLT had given its imprimatur to the Resolution Plan that was submitted by the SRA and this was the Approval Date i.e., “Y” as per the Implementation Schedule set out under Clause 7.7 of the Resolution Plan. The SRA had to fulfil the five Conditions Precedent within a period of 90 days, that was extendable to an additional 180 days i.e., 270 days in total. This period expired on 22.03.2022. However, the same was extended vide order dated 11.04.2022 by the NCLT until 25.05.2022, by allowing an exclusion of 65 days.

93Copy pinpoint93. Upon receiving the AOC from the relevant authorities on 20.05.2022 i.e., within the extended time period as allowed by the NCLT, the SRA asserted that the Effective Date had been achieved. The SRA had approached the NCLT seeking a declaration from the Tribunal that all the Conditions Precedent have been met and that the SRA be allowed to begin the implementation of the Resolution Plan. Vide order dated 13.01.2023, the NCLT held that all the Conditions Precedent had indeed been met and that 20.05.2022 would be

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considered as the Effective Date for the purposes of implementation of the Resolution Plan. The findings of the NCLT in the aforesaid order are reproduced hereinbelow: “Findings:

122. […] However, having considered the rival submissions and on perusal of record with regards to satisfactory compliance of conditions precedent (CPs) it is noted that there is no dispute so far as satisfactory compliance of CPs at serial no. (i) and (v) as per approved plan i.e.:- (i) Validation of Air Operator Certificate by Directorate General of Civil Aviation (DGCA) and Ministry of Civil Aviation (MoCA) and (v) Approval of demerger of ground handling business into all capital AGSL. In this background we have thus considered if the remaining three CPs are duly complied with by the applicant or otherwise.

123. As regards to CP No. 2 i.e. Submission and approval of business plan to DGCA and MoCA: The business plan was submitted to above Authorities to fulfil compliance of DGCA’s Show Cause Notice (SCN) to CD of April 2019. SCN states that Air Operator Certificate will be issued after MoCA approves the business plan. Thus, with issuance of Air Operator Certificate, it is implied that the business plan has been approved. Even otherwise, guidelines for issuance of Air Operator Certificate being CAP 3100 clearly states that the DGCA will review the detailed business plan of the Applicant before issuance of Air Operator Certificate and with issuance of Air Operator Certificate there is implied approval of MoCA. In the background of above we find that this CP is satisfactorily complied with the issuance of AOC.

124. As regards to CP No. 3 i.e. Slots Allotment Approval: It is noted that plan approval order of this Tribunal dated 22nd June, 2021 stipulates that no historic slots will be granted to Corporate Debtor or SRA. Admittedly, there is no challenge to this order thereby accepting the fact that old slot cannot be reinstated. Accordingly, this CP needs to

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be read with plan approval order, where Corporate Debtor shall be provided with such slots for which it applies. There is no dispute that slots for which SRA applied were granted to them by the concerned Competent Authority including the slots in Delhi and Mumbai, on settling the old dues and as such it cannot be considered as non-allotment of slots, as SRA has received the slots it requested for in compliance with plan approval order. The SRA cannot get all previous slots as this condition needs to be read with plan approval order of this Tribunal. In that view of the matter, above CPs is also found to be Satisfactorily complied with.

125. As regards to CP no. 4: International Traffic Right Clearance: On perusal of the plan approval order dated 22nd June, 2021, it is found that no blanket approval can be granted upfront to the SRA as it has to approach the concerned authorities for grant of such approval as per applicable laws. As already stated above, the plan approval order has reached its finality, thus, accepting the fact that all the approval issued upfront cannot be reinstated. Accordingly, this condition precedent needs to be read with plan approval order. Even otherwise there is no dispute that under the approved plan, SRA has to re-commence with operation of six aircrafts. The International Traffic Rights clearance is required to be obtained in compliance with the applicable laws which stipulates that minimum twenty aircrafts are required to be deployed before applying for such clearance. In view of this, we find that this condition cannot be satisfied upfront and needs to be satisfied in compliance with applicable laws i.e., after the SRA has twenty aircrafts in operation which can only be achieved once the operation is re-commenced successfully. Accordingly, this condition can only be fulfilled after the SRA/Applicants re-commences its business and not prior to its commencement. It goes without saying that plan approved by this Tribunal has to be implemented without any modification much less than on satisfaction of any other undertaking and thus, the effective date and completion date of condition precedent under the plan shall have to be read as 20th May, 2022.

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126. In the background of above facts and for the reasons stated above we hold that in addition to CPs (I) & (V) which are admittedly complied, remaining CPs (II), (III), (IV) are also duly complied.”

94Copy pinpoint94. During the period when the aforesaid order of the NCLT was passed, the SRA possessed a valid AOC and therefore, there was no dispute pertaining to this Condition Precedent. With respect to the Slot Allotment Approval, the NCLT observed that although the historic slots which were available to the Corporate Debtor could not be obtained by the SRA, yet the slots for which the SRA had applied were granted to it by the concerned authorities upon settling the old dues and as such, this could not be considered as non-allotment of slots. Therefore, this Condition Precedent was found to be satisfactorily complied with. As regards the Condition Precedent on obtaining International Traffic Rights Clearance, the applicable law required a minimum of 20 aircrafts to be deployed before applying for such a clearance. However, under the approved Plan, the SRA had to re-commence with the operations with only six aircrafts. It was, therefore, held that this Condition Precedent could not have been satisfied upfront and could only be satisfied once the operations of the Corporate Debtor had commenced successfully. With such observation, this Condition Precedent was also found to be duly complied with. The NCLT noted that the plan which was approved vide the Plan approval order dated 22.06.2021 had to be implemented without any modification and thus the Effective Date i.e., the date of completion of the Conditions Precedent under the Resolution Plan should be read as 20.05.2022.

95Copy pinpoint95. The Appellants filed a statutory appeal against the order of the NCLT dated 13.01.2023 before the NCLAT and also sought a stay on the same. However, the grant of stay was declined by the NCLAT on 03.03.2023. This should have closed the debate on the understanding between the parties that the Effective Date was set in stone.

96Copy pinpoint96. The NCLAT also vide its impugned order held that the SRA had fulfilled all the required Conditions Precedent. On Slot Allotment Approval, it was held that 48 slots have been obtained by the SRA for the recommencement of operations. The contention of the Appellants that airport charges are required to be paid upfront for obtaining such slots was rejected since the NCLAT was of the opinion

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that the payment towards airport charges, which are a part of CIRP costs, must be made as per the terms of the Resolution Plan when its implementation had begun. Therefore, it was declared that the Condition Precedent on Slot Allotment Approval was fulfilled despite the non-payment of Airport Dues by the SRA. On International Traffic Rights Clearance, the NCLAT echoed the opinion of the NCLT that it could not have obtained this clearance without commencing and amplifying the operations of the Corporate Debtor. It was observed that this Condition Precedent should not come in the way of the implementation of the Resolution Plan. As regards the AOC, it was contended by the Appellants that the same had lapsed after 03.09.2023 and no extension was granted by the DGCA thereafter. However, the NCLAT was of the view that the AOC was valid on the date when the SRA had approached the NCLT for a declaration that the Conditions Precedent were fulfilled and also when the order dated 13.01.2023 of the NCLT was passed. The expiry of the validity period of the AOC during the pendency of the Company Appeal was not considered sufficient grounds to hold that the Condition Precedent was not fulfilled. The NCLAT while reaffirming that all the Conditions Precedent were satisfactorily fulfilled observed that there was no infirmity in the order of the NCLT dated 13.01.2023. The NCLAT further directed the SRA to make an application for the re-issuance of the AOC within 90 days from the date of its order i.e., by 12.06.2024.

97Copy pinpoint97. The nature of the Conditions Precedent laid out under the Resolution Plan were such that several of them could not be fulfilled before the operationalization of the Corporate Debtor. The assertion that the Effective Date would kick in only upon fulfilment of all the Conditions Precedent and since the Appellants had challenged the fulfilment of the Conditions Precedent, such a date could not be said to have yet arrived, cannot be accepted. The order of the NCLT dated 22.06.2021 approving the Resolution Plan had fixed the Effective Date as the 90th day from the Approval date, which was subject to a maximum extension of another 180 days. It consciously removed the ambiguity that plagued Clauses 7.6.2 and 7.6.4 respectively for the precise reason & with the idea that the Effective Date should not be endlessly postponed. Agreeing to such an erroneous proposition would mean that the Effective Date would never be achieved as long as the parties are litigating

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before the Courts and the SRA would be absolved of taking the implementation under the Resolution Plan further. The NCLAT had declined to stay the order of the NCLT dated 13.01.2023 which held that all the Conditions Precedent were fulfilled. Further, on a perusal of the impugned order, it is evident that the NCLT and NCLAT rendered concurrent findings of fact that the SRA had fulfilled all the Conditions Precedent. In other words, it was repeatedly declared by different fora that the Effective Date was frozen on 20.05.2022 and the obligation of the SRA to implement the Resolution Plan was absolute. All steps necessary should have been undertaken by the SRA, at least post the impugned order of the NCLAT dated 12.03.2024. To contend that its hands were tied since the Conditions Precedent were still being challenged before this Court is nothing but a reflection of the mala fide intention on the part of the SRA to not fulfil its obligations in accordance with the Resolution Plan under the garb of pendency of litigation. Such an undue delay cannot be permitted, especially in light of the intention of the IBC, 2016 to ensure a successful and time-bound revival of the Corporate Debtor. This places a higher obligation on the SRA to act in an expeditious manner.

b. Whether the NCLAT could have directed the Performance Bank Guarantee (PBG) to be adjusted against the first tranche payment which was to be made within 180 days of the Effective Date?

98Copy pinpoint98. There is no dispute to the fact that the Effective Date was frozen on 20.05.2022. Therefore, as per Clause 6.3.1(g) on the “Infusion of Funds and Timelines”, and Serial No.11 under Clause 7.7, the first tranche payment of Rs. 350 Crore had to be made by the SRA, upfront, within a period of 180 days from the Effective Date i.e., 20.05.2022. As per the Resolution Plan, this 180-day timeline otherwise would have expired on 16.11.2022. Several extensions were granted to the SRA to infuse this amount, at different stages of this litigation, by the NCLT, the NCLAT and this Court as well - First, by the NCLT vide order dated 13.01.2023, by which the timeline for infusion of first tranche payment was extended till 15.05.2023; Secondly, by the NCLAT vide order dated 26.05.2023, where the timeline of 180 days was further extended up to 31.08.2023; Thirdly, again by the NCLAT vide order dated 28.08.2023, where the timeline of 180 days was

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extended up to 30.09.2023; and Fourthly, by this Court vide order dated 18.01.2024, whereby the time of 180 days for infusion was extended up to 31.01.2024.

I. The adjustment of the PBG was impermissible under the terms of the Resolution Plan read with Regulation 36B(4A) of the 2016 Regulations.

99Copy pinpoint99. It is the case of the SRA that as per Clause 6.4.4 on the “Treatment of Financial Creditors” and the table adduced under the heading “Summary of payment and security package”, the PBG of Rs. 150 Crore could have been adjusted against the payment of the first tranche. It was submitted that in the last column of the table, the “Date of Release of Security” is provided. In the very first head in the column on date of release of security, the expression “PBG adjusted” has been mentioned against the first tranche of cash payment to be made to the Financial Creditors. Further, in the explanation given to the said table under Clause 6.4.4(a)(i), against the heading “Date of Release of Security”, there is no mention of the PBG while the other two types of security find a mention. It was submitted that the only good reason for this exclusion was the understanding that the PBG was adjustable against the obligation of the SRA towards payment of the first tranche. Further, it is the case of the SRA that since a revolving security package was agreed to under Clause 6.4.4, other types of security were envisioned for the subsequent tranches of payment and therefore, no issue could have been raised in adjusting the PBG towards the first tranche. However, we find it extremely difficult to agree with the stance of the SRA for multiple reasons which are detailed below.

100Copy pinpoint100. The RFRP under Clause 3.13 deals with the Performance Security to be given by the SRA. Clause 3.13.1 provides that the SRA shall furnish or cause to be furnished, an unconditional and irrevocable PBG, of an amount of Rs. 150 Crore in favor of the SBI within 7 days of being declared as the SRA. Clause 3.13.2 provides that the PBG shall be valid, till the later of (a) a period of 180 days from the date of the PBG; and (b) the date of completion of the implementation of the Resolution Plan, as determined by the RP and the CoC. Clause 3.13.7 provides that the PBG can be invoked or appropriated at any time by the SBI, without any reference to the SRA, upon the occurrence of any of the following conditions;

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i. If any of the conditions under the Letter of Intent or the Resolution Plan are breached; ii. If the SRA fails to re-issue or extend the PBG in accordance with the terms of the RFRP; or iii. Failure of the SRA to implement the Resolution Plan to the satisfaction of the CoC, and in accordance with the terms of the Resolution Plan. Clause 3.13.8 provides that the PBG shall be returned to the SRA within a period of 7 days, upon 100% completion of the implementation of the Resolution Plan by the SRA. Finally, Clause 3.13.9 states in categorical terms that, the PBG shall not be set-off against or used as part of the consideration that the SRA proposes to offer in relation to the Corporate Debtor, even if expressly indicated as such by the SRA in the Resolution Plan.

101Copy pinpoint101. It is of vital importance that the aforementioned clauses of the RFRP are read conjointly with Clauses 7.3 and 9.4 of the Resolution Plan. Clause 7.3 of the Resolution Plan deals with the “Compliance with respect to Regulation 36B(4A)” and states that the SRA undertakes to provide the PBG as per the terms of the RFRP in favor of the SBI within 7 days of it being declared as the SRA. Clause 9.4 of the Resolution Plan is titled “Implementation” and states that “the performance guarantee provided by the Resolution Applicant can be invoked in accordance with the terms of the RFRP”. Therefore, it is as clear as a noonday that the terms of the RFRP, particularly in relation to the performance security i.e., PBG, stood incorporated in the Resolution Plan by way of Clauses 7.3 and 9.4 respectively of the Resolution Plan.

102Copy pinpoint102. Furthermore, in the Covering Letter adduced with the Resolution Plan, the SRA stated as thus: “4. We hereby undertake that we, and our Representatives, shall at all times, be in compliance with the provisions of the RFRP, the Non-Disclosure Agreement, the IB Code and the CIRP Regulations. xxx xxx xxx c. Acceptance We hereby unconditionally and irrevocably agree and accept the terms of the RFRP and that the decision made

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by the Resolution Professional, CoC and/or the Adjudicating Authority in respect of any matter with respect to, or arising out of, the RFRP and the Resolution Plan Submission Process shall be binding on us…

xxx xxx xxx

10. We confirm that we have not taken any deviations so as to be deemed non-responsive with respect to the provisions of the RFRP, the IB Code and the CIRP Regulations.” (emphasis supplied)

A bare reading of the above also strengthens the conclusion that the SRA has to remain compliant with the terms of the RFRP, at all times, in addition to being obedient to the terms of the Resolution Plan. Therefore, to say that the RFRP was merely a wish list of the CoC which was informed to the applicants at the time of inviting plans is incorrect, to say the least. The provisions of the RFRP, especially those provisions related to the Performance Security or PBG, were binding on the SRA.

103Copy pinpoint103. The learned counsel for the SRA tried to place reliance on one another Clause of the Resolution Plan i.e., Clause 6.4.12 which stated that the PBG would bring financial flexibility and help the SRA to advance certain committed payments. This according to the SRA is an affirmation of the fact that the PBG could have been adjusted against the first tranche payment. However, it must be pointed out that Clause 6.4.12 was amended vide an Addendum to the Resolution Plan dated 02.10.2020. The erstwhile Clause 6.4.12 of the Resolution Plan reads thus: “6.4.12. Request for the consideration of the CoC - The Resolution Applicant shall provide a performance security bank guarantee for a total sum of Rs. 47.5 Crores, which will bring financial flexibility for the Resolution Applicant and help the Resolution Applicant advance the committed payments and achieve its goal of re-commencing the operations of Jet Airways at the earliest.” However, the aforesaid Clause 6.4.12 of the Resolution Plan was deleted in its entirety and replaced with the following:

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“6.4.12. Request for the consideration of the CoC - As required under the RFRP, the Resolution Applicant shall provide the performance security bank guarantee (“PBG”) for a total sum of Rs. 150 Crores. The PBG will be provided in two parts, with the first PBG of Rs. 47.5 Crores provided within 7 (seven) days from the date of receipt of LOI; and PBG for the remaining sum of Rs. 102.5 Crores provided on the Effective Date.” A reading of the amended Clause 6.4.12 of the Resolution Plan indicates that the parties had mutually agreed to do away with the phrase “which will bring financial flexibility for the Resolution Applicant and help the Resolution Applicant advance the committed payments and achieve its goal of re-commencing the operations of Jet Airways at the earliest”. What can be plainly deduced from such a deletion is that the PBG cannot be used by the SRA to advance any payments that are required to be paid under the scheme of the Resolution Plan. This, additionally, cements the idea that the PBG could not be adjusted towards any consideration or payment which had to be made by the SRA. Such an amendment in Clause 6.4.12 only brought the Resolution Plan further in line with the terms of the RFRP.

104Copy pinpoint104. An adjustment of the PBG against the first tranche payment would also be in violation of Regulation 36B(4A) of the 2016 Regulations which was inserted by Notification No. IBBI/2019-20/GN/REG040 dated 24.01.2019. The same is reproduced hereinbelow: “(4A) The request for resolution plans shall require the resolution applicant, in case its resolution plan is approved under sub-section (4) of section 30, to provide a performance security within the time specified therein and such performance security shall stand forfeited if the resolution applicant of such plan, after its approval by the Adjudicating Authority, fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule. Explanation I. – For the purposes of this sub-regulation, “performance security” shall mean security of such nature, value, duration and source, as may be specified in the request for resolution plans with the approval of the

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committee, having regard to the nature of resolution plan and business of the corporate debtor. Explanation II. – A performance security may be specified in absolute terms such as guarantee from a bank for Rs. X for Y years or in relation to one or more variables such as the term of the resolution plan, amount payable to creditors under the resolution plan, etc.” (emphasis supplied)

105Copy pinpoint105. Regulation 36B(4A) states that the performance security shall stand forfeited if the resolution applicant fails to implement or contributes to the failure of implementation of the plan, in accordance with the terms of the Resolution Plan and its implementation Schedule. Therefore, the PBG had to be kept alive until the complete implementation of the Resolution Plan as per Regulation 36B(4A) as well. This is also what is provided under Clauses 3.13.2 and 3.13.8 of the RFRP respectively wherein the PBG was required to be kept alive and was to be returned to the SRA only upon 100% completion of the implementation of the Resolution Plan. This binding nature of the RFRP was transferred onto the Resolution Plan through Clauses 7.3 and 9.4 respectively of the Resolution Plan.

106Copy pinpoint106. The NCLAT in one of its orders i.e., the order dated 26.05.2023, had restrained the Appellants from invoking the PBG without the leave of the NCLT. While saying so, the following observations were made; “19. When the Resolution Plan of the Corporate Debtor has received approval up to Hon’ble Supreme Court and the Monitoring Committee is constituted under the Plan to oversee implementation, the Monitoring Committee has to act as a facilitator for implementation of the Resolution Plan instead of finding fault and taking steps, which does not facilitate the implementation, rather delay the implementation. There is no doubt that Performance Bank Guarantee can be invoked by the MC Lenders, but the said invocation can only take place when SRA has failed to implement the Plan. Present is a case where directions have been issued to both MC Lenders and SRA to implement the Plan and the event of failure of the Plan has not yet arrived. When the Adjudicating Authority

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has directed on 13.01.2023 to take steps towards the implementation of the Plan and which order was not been stayed by this Tribunal on 03.03.2023, the steps ought to have been taken by the MC Lenders in furtherance of the implementation. The time has not arrived for invoking the Performance Bank Guarantee. When the SRA is ready to undertake to perform its obligations under the Plan, we are of the view that Performance Bank Guarantee given by the SRA cannot be permitted to the invoked by the MC Lenders. MC Lenders instead of threatening to invoke Performance Bank Guarantee, should take steps, which may help implementation of the Plan and to achieve the objective of Resolution Plan. The Resolution Plan has been approved with the intent and purpose to revive the Corporate Debtor, which revival is in accordance with objective and purpose of the IBC. We again reiterate that efforts by MC Lenders and SRA should be coordinated for revival of the Corporate Debtor, so as to start its operations at an early date, which is in the interest of all stake holders as well as in the interest of Corporate Debtor.

20. In view of the aforesaid, we direct that MC Lenders shall not invoke the Performance Bank Guarantee in the facts of the present case as on date, and for invocation, if any, MC Lenders may take leave of the Adjudicating Authority. The IA Nos.2159-2160 is disposed of accordingly.” (emphasis supplied)

107Copy pinpoint107. A careful reading of the aforesaid order of the NCLAT reflects that the NCLAT had itself conceded to the position that the Appellants have a right to invoke the PBG in a situation where the SRA had failed to implement the Resolution Plan. This is again in line with the intention under Regulation 36B(4A). Therefore, even in light of the NCLAT’s own order dated 26.05.2023, it does not follow that the PBG could have been adjusted by the SRA, mid-implementation, against its payment obligation.

108Copy pinpoint108. The NCLAT in its order dated 28.08.2023 dealt with the issue of adjustment of PBG against the first tranche payment in light of the

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offer made in the Lender’s Affidavit dated 16.08.2023 and made certain observations regarding Regulation 36B(4A) of the 2016 Regulations. The same are as follows: “26. When we look to the Regulation 36B (4A) it is clear that the provision provides that RFRP shall require Resolution Applicant to provide Performance Bank Guarantee within the time specified. Sub-Section 4A provides that if Resolution Applicant after approval fails to implement Performance Security it shall stand forfeited. Present is a case, where Performance Security has already been provided in compliance of sub- Regulation 4A and present is not a case that any power to forfeit the Performance Bank Guarantee to be exercised under sub-Regulation (4A). On Explanation I, attention of the Court was drawn by Learned Counsel for SRA, which indicates that the performance security which is contemplated, can be of such nature, value, duration and source as may be specified. Thus, Performance Security can be of a particular duration and when the Resolution Plan provides release of security at the time of first tranche of payment of Rs. 350 Crores, no exception can be taken to adjustment of the Performance Bank Guarantee. The request of SRA to adjust Performance Bank Guarantee of Rs. 150 Crores is thus according to Clause 6.4.4 of the Resolution Plan on which no exception can be taken.

27. Submission was made by Learned Sr. Counsel for the Appellant that performance Bank Guarantee has to be maintained till the completion of the plan. The summary of payment and security package as contained in the table indicate that there are large numbers of other securities which are to be continued. The securities in the last column which are mortgaged over three Dubai Properties are to be released on year 5 or on complete payment whichever is earlier. The plan thus provides for adequate securities to ensure the payment hence the adjustment of Performance Bank Guarantee in the first tranche of payment cannot be said to be against the Resolution Plan. We thus are of the view that prayer made by the Applicant in the Application in Prayer (a) is to be allowed.” (emphasis supplied)

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109Copy pinpoint109. A bare perusal of the above observations would indicate that the NCLAT proceeded on an incorrect understanding of Regulation 36B(4A) and its First Explanation. Regulation 36B(4A) does not state that if the Resolution Applicant, after approval, fails to implement the PBG, then it shall stand forfeited. Instead, what the Regulation actually states is that the performance security shall stand forfeited, if the resolution applicant of such a plan, after its approval by the Adjudicating Authority, “fails to implement or contributes to the failure of implementation of that plan in accordance with the terms of the plan and its implementation schedule”. It is not the failure to implement the performance security i.e., the PBG, that is dealt with in this Regulation but the consequence of the failure to implement “the Plan” by the SRA.

110Copy pinpoint110. Further the order dated 28.08.2023 proceeds to interpret Explanation I to Regulation 36B(4A) and states that since according to Explanation I, the performance security can be of a particular duration, the Resolution Plan can provide for the release of security at the time of the first tranche payment of Rs. 350 Crore and no exception can be taken to the adjustment of the PBG. However, what the NCLAT failed to take notice of is that under Explanation I to Regulation 36B(4A), the performance security shall mean security of such nature, value, duration and source, as may be specified “in the request for resolution plans”. The duration of the performance security that has been specified in the RFRP is given under Clauses 3.13.2 and 3.13.8 of the RFRP which categorically states that the PBG shall be kept alive until the Resolution Plan has been completely implemented. This is the duration which is referred to in Explanation I to Regulation 36B(4A).

111Copy pinpoint111. Now, if the intention under the RFRP, the Resolution Plan (under Clauses 7.3 and 9.4) and Regulation 36B(4A) was that the PBG had to be kept alive till the completion of implementation of the Resolution Plan by the SRA and that it cannot be set-off against any payment obligation, then how do we reconcile such an intention with the expression “PBG adjusted” mentioned under Clause 6.4.4 of the Resolution Plan? As mentioned above, Clauses 7.3 and 9.4 respectively of the Resolution Plan incorporated the terms of the RFRP into the Resolution Plan. Clause 3.13.9 of the RFRP states that the PBG shall not be set off against any payment or consideration which is to be made by the SRA, even if expressly provided so under the Resolution Plan. Clause 6.4.4 is quite ambiguous in

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its construction regarding the question whether the PBG can be specifically adjusted against the first tranche payment. Although in the Summary of Payments and Security Package, under the column titled “Date of release of security”, the expression “PBG adjusted” exists, yet Clause 6.4.4(a)(i) which furnishes some additional clarity on the Summary of Payments and Security Package provides no mention of the PBG under the heading “Date of release of Security”, while the other two forms of security i.e., the BKC property and Dubai property No.1 are mentioned. The argument of the counsel for the Respondent is that this omission indicates that the PBG would be adjusted under the first tranche payment. However, in our considered opinion irrespective of whether Clause 6.4.4 expressly or impliedly provided for the PBG to be adjusted, such a provision would create a dissonance with Clause 3.13.9 of the RFRP which has also been made binding on the SRA through Clauses 7.3 and 9.4 respectively of the Resolution Plan. Therefore, such an adjustment should not be allowed in the facts of the present case.

II. The Lender’s Affidavit dated 16.08.2023 did not impose conditions which were different from the terms of the Resolution Plan.

112Copy pinpoint112. It is the case of the Appellants that Serial No.11 under Clause 7.7.1 read with Clause 6.1.3(g) evidences that the SRA had to infuse Rs. 350 Crore “in cash” and it was for this reason alone that Para 8(a) of the Lender’s Affidavit required the infusion of Rs. 350 Crore to be done in cash by 31.08.2023. It was submitted that such a requirement for cash payment flowed directly from the Resolution Plan under which an adjustment of the PBG was impermissible and not just out of the Lender’s Affidavit dated 16.08.2023. This is because the Lender’s Affidavit has not and cannot impose any condition over and above the one laid under the Resolution Plan.

113Copy pinpoint113. On the other hand, the Respondents vehemently submitted that it was only the Lender’s Affidavit dated 16.08.2023 which stipulated the condition that Rs. 350 Crore had to be infused in cash by 31.08.2023, while the Resolution Plan, under Clause 6.4.4 allowed for the payment of Rs. 200 Crore in cash and Rs. 150 Crore through adjusting the PBG. In other words, they argued that the conditions envisaged in the Lender’s Affidavit were different from those stipulated in the Resolution Plan.

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114Copy pinpoint114. However, the intent of the legislature is very clear on the aspect that once a Resolution Plan is approved by the Adjudicating Authority i.e., the NCLT, it becomes binding on all the stakeholders involved in the Resolution Plan. Section 31(1) of the IBC, 2016 reads as thus: “31. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (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.” (emphasis supplied)

115Copy pinpoint115. This Court in Ebix Singapore Private Limited v. Committee Of Creditors of Educomp Solutions Limited and Another reported in (2022) 2 SCC 401 was faced with the issue whether withdrawals or modifications by successful resolution applicants were permissible under the IBC, 2016 i.e., whether a resolution applicant is entitled to withdraw or modify its Resolution Plan, once it has been submitted by the Resolution Professional to the Adjudicating Authority and before it is approved by such authority under Section 31(1) of the IBC, 2016. It was unequivocally held that, based on the plain terms of the IBC, 2016, the Adjudicating Authority lacks the power to allow the withdrawal or modification of the Resolution Plan by a successful resolution applicant or to give effect to any such clauses in the Resolution Plan. The relevant observations made are reproduced hereinbelow: “164. The approval of the adjudicating authority under Section 31(1) IBC has the effect of making the resolution plan binding on all stakeholders. These stakeholders include the employees of the corporate debtor whose terms of employment would be governed by the resolution plan, the Central and State Governments who would receive

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their tax dues on the basis of the terms of the resolution plan and local authorities to whom dues are owed. These stakeholders are not direct participants in the CIRP but are bound by its consequence by virtue of the approval of the resolution plan, under Section 31(1) IBC. Section 31(1) ensures that the resolution plan becomes binding on all stakeholders after it is approved by the adjudicating authority. The language of Section 31(1) cannot be construed to mean that a resolution plan is indeterminate or open to withdrawal or modification until it is approved by the adjudicating authority or that it is not binding between the CoC and the successful resolution applicant. Regulation 39(4) of the CIRP Regulations mandates that the RP should endeavor to submit the plan at least fifteen days before the statutory period of the CIRP under Section 12 is due to expire along with a receipt of a PBG and a compliance certificate as Form H. It is pertinent to note that sub-section (3) to Section 12 mandates that the CIRP process, including legal proceedings, must be concluded within 330 days. This three-hundred-and-thirty-day period can be extended only in exceptional circumstances, if the process is at near conclusion and serves the object of IBC, as held by a three-Judge Bench of this Court in Essar Steel [Essar Steel (India) Ltd. (CoC) v. Satish Kumar Gupta, (2020) 8 SCC 531 : (2021) 2 SCC (Civ) 443]. Therefore, after accounting for all statutorily envisaged delays which the RP has to explain in its Form H and otherwise through Regulation 40-B, the procedure envisages a fifteen-day window between submission of resolution plan and its approval or rejection by the adjudicating authority. This clearly indicates that the statute envisages a certain level of finality before the resolution plan is submitted for approval to the adjudicating authority. Even the CoC is not permitted to approve multiple resolution plans or solicit EoIs after submission of a resolution plan to the adjudicating authority, which would possibly be in contemplation if the resolution applicant was permitted to withdraw from, or modify, the plan after acceptance by the CoC. Regulation 36-B(4-A) requires the furnishing of a performance security which

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