Committee of Creditors of Amtek Auto Limited through Corporation Bank vs Dinkar T Venkatasubramanian & Ors.

HELD: Application for Rectification

1. The order of this Court dated 18 June 2020 must be understood in the context of the IA which was moved by DVI. When the three judge Bench in its order dated 18 June 2020 observed that the “application made by the applicant for withdrawal of the offer is hereby rejected” it must be understood in the context of the plea which was setup by DVI. There can be no mistaking the fact that DVI, despite having submitted a resolution plan which had undergone discussion and revision before the CoC before being approved in the meeting of the CoC of 11 February 2020, was seeking to renege its applications to fulfill the resolution plan. The plea for being allowed to reexamine the impact of the pandemic and to re-negotiate the terms of the resolution plan makes it abundantly clear that DVI was not willing to fulfill the terms of the obligations which it had agreed. This is evident from the fact also that though DVI was obliged to furnish the second tranche of its performance bank guarantee of INR 150 crores, it was not ready to do so. On the contrary, apprehending a threat of the invocation of the first tranche of the bank guarantee of INR 150 crores, DVI pleaded special equities and sought a direction allowing it to keep the bank guarantee alive until the process of re-negotiation was completed in two months. This again was to overcome the consequence of the invocation of the bank guarantee arising from DVI’s default. The prayer seeking a direction to allow DVI to extend the bank guarantee was artfully worded since the effect would be to restrain the invocation of the bank guarantee. The present application, this judgment is based on the record as it stands, which leaves no manner of doubt that DVI was seeking to renege on its commitments. When the order of this Court dated 18 June 2020 alludes to “the application made by the applicant for withdrawal of the offer”, the reference is clearly to the substantive content of the IA which indicates that DVI was not ready to abide by the commitments made by it in the resolution plan. The latter part of the order dated 18 June 2020, placed DVI on notice that if it indulged in such kind of practices in the future, it was “to be treated as contempt of this Court in view of the various orders passed by this Court at his instance”. DVI submits that the orders of this Court were not passed at its instance since applications for the extension of time had earlier been granted on the request by the CoC. However, there can be no manner of doubt that the extensions of time granted by this Court were to enable a due consideration of the proposals of resolution applicants of which DVI undoubtedly was an applicant. [Para 27][1036-D-H; 1037-AE]

2. On 10 February 2020, the CoC sought an extension of a week for the resolution plan to be voted upon by the members of the CoC. On 11 February 2020, the resolution plan of DVI was approved and an affidavit was filed by the RP before this Court on 19 February 2020 reporting the approval of DVI’s resolution plan by the CoC. Appropriate directions were sought. This sequence of events leaves no manner of doubt that the extensions which were granted were to facilitate the process initially of inviting resolution applicants to submit their plans and later for the evaluation of the plans which had been submitted. After DVI was found to be the highest evaluated resolution applicant, extensions were sought and granted for the resolution plan to be finalized and voted upon by the CoC. Who sought an extension of time is really beside the point and is of subsidiary importance. Formally it may be true that the extensions were applied for by the CoC, with the RP having apprised this Court also of the approval granted to DVI’s resolution plan. However, DVI was the beneficiary of the extensions which were granted by this Court. The extensions granted from time to time facilitated the consideration of the resolution plan submitted by DVI. DVI cannot be heard to contend that the order of this Court dated 8 June 2020 suffers from an error when the process of seeking extensions before this Court ultimately led up to the approval of its resolution plan. DVI’s application for rectification, in other words, is an attempt to renege from the resolution plan which it submitted and to resile from its obligations. This is a devious attempt which must be disallowed. The rectification application must accordingly be dismissed. [Para 29][1038-C-H] Contempt Petition

3. The issue which needs to be addressed is whether recourse to the contempt jurisdiction is valid and whether it should be exercised in the facts of this case. Undoubtedly, the conduct of DVI has not been bona fide. The extension of time in the course of the judicial process before this Court enures to the benefit of DVI as a resolution applicant whose proposal was considered under the auspices of the directions of the Court. DVI attempted to resile from its obligations and a reading of its application which led to the passing of the order of this Court dated 18 June 2020 will leave no doubt about the fact that DVI was not just seeking an extension of time but a re-negotiation of its resolution plan after its approval by the CoC. Then again, despite the order of this Court dated 18 June 2020 rejecting the attempt of DVI, it continued to persist in raising the same pleas within and outside the proceedings before the NCLAT. The conduct of DVI is lacking in bona fides. The issue however is whether this conduct in raising the untenable plea and in failing to adhere to its obligations under the resolution plan can per se be regarded as a contempt of the order of this Court dated 18 June 2020. DVI was undoubtedly placed on notice of the order that should it proceed in such terms, it would invite the invocation of the contempt jurisdiction. Having said that, it is evident that the order of this Court dated 18 June 2020 rejected the IA moved by DVI and as a necessary consequence, the basis on which the reliefs in the IA were sought. Therefore correctly, it has been now stated on behalf of the DVI that it will not set-up a plea of force majeure in view of the dismissal of its IA on 18 June 2020. However lacking in bona fides the conduct of DVI was, we must be circumspect about invoking the contempt jurisdiction as setting up an untenable plea should not in and by itself invite the penal consequences which emanate from the exercise of the contempt jurisdiction. Likewise, the default of DVI in fulfilling the terms of the resolution plan may invite consequences as envisaged in law. On the balance, this Court is of the considered view that it would not be appropriate to exercise the contempt jurisdiction.[Para 38][1042-B-H]