2020 (9) TMI 591 - Tri - Insolvency and Bankruptcy

Approval of Resolution Plan - the plan was approved by CoC - Section 31 (1) of the Insolvency and Bankruptcy Code 2016 - HELD THAT - The COC approved the Resolution Plan submitted by M/S. NCJ Infrastructure Private Limited in which the total amount offered was revised and recorded their reasons for approval as required under Regulation 39 (3) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016. It is specifically noted that the Resolution Applicant will infuse capital of Rs. 1 00 00, 000/- in the Company by way of equity/equity linked instruments. Further depending on the requirements of the Company the Resolution Applicant proposes to infuse the additional funds up to Rs. 9, 00, 00, 000/by way of equity/ equity linked instruments or loan which will be utilised for day to day operations of the company and to meet the capex requirements to revive the operations of the company as and when required by the company in the ordinary course of business - The Resolution Applicant has filed the Affidavit stating that at the time of submission of Resolution Plan and thereafter an additional affidavit has been filed which states that neither the Resolution Applicant nor any other person acting jointly or in concert with the Resolution Applicant nor any connected person as provided under Section 29-A of the IBC 2016. The accounts of the Resolution Applicant and any connected person or an account of the Corporate Debtor under the management or control of such person of whom such person is a Promoter is not classified as nonperforming asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulations Act 1949 or guidelines of a Financial Sector Regulator issued under any other law for the time being in enforce and at least a period of one year or more has lapsed from the date of such classification till the date of commencement of Corporate Insolvency Resolution Process of the Corporate Debtor and the applicant have not failed to make the payment of all overdue amounts with interest therein and charges related to non-performing assets before submission of the Resolution Plan. The parameters for approval of Resolution Plan are set out in Section 30 and 31 of the IBC 2016. The Resolution Plan has to fulfil certain mandatory requirements under the Code and CIRP Regulations and the Resolution plan has complied with such mandatory compliance - the Resolution Plan annexed with the CA-441/CIll/ND/2019 filed in CP 1B No. 22/ND/2018 is hereby approved which shall be binding on the Corporate Debtor and its employees members promoters creditors guarantors and other stakeholders involved in the Resolution Plan including the Resolution Applicant. The Resolution Applicant shall pursuant to the Resolution Plan approved under Section 31(1) of the I B Code 2016 obtain all the necessary approval as may be required under any law for the time being in force within a period of one year from the date of approval of the Resolution Plan by this authority or within such period as provided for in such law - The order of moratorium passed by this Adjudicating Authority under Section 14 of the IBC 2016 shall cease to have effect from the date of passing of this Order.

Summary

Issues Involved:

1. Approval of the Resolution Plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016.
2. Objections raised by the ex-management regarding the valuation of properties and participation in the Committee of Creditors (COC) meetings.
3. Compliance with the provisions of the Insolvency and Bankruptcy Code, 2016, and related regulations.
4. The role of the Committee of Creditors in approving the Resolution Plan.
5. Judicial review limitations of the Adjudicating Authority over the commercial decisions of the COC.
6. Specific compliance with the amended Form-H and performance security requirements.
7. Implementation and monitoring of the Resolution Plan.

Issue-wise Detailed Analysis:

1. Approval of the Resolution Plan under Section 31(1) of the Insolvency and Bankruptcy Code, 2016:
The Resolution Professional (RP) submitted the Resolution Plan approved by the COC and sought approval under Section 31(1) of the IBC, 2016. The COC approved the plan with a 100% voting share, and the Adjudicating Authority's role was to ensure compliance with Section 30(2) of the IBC, 2016, and relevant regulations.

2. Objections raised by the ex-management regarding the valuation of properties and participation in the Committee of Creditors (COC) meetings:
The ex-management contended that the properties of the Corporate Debtor were undervalued at Rs. 143 Crores against an actual value of Rs. 490 Crores. They also claimed they were not given a chance to participate in COC meetings. The RP countered that the ex-management was informed about the CIRP commencement and COC meetings via email. The objections were found to be without merit, as the RP provided evidence of compliance and communication.

3. Compliance with the provisions of the Insolvency and Bankruptcy Code, 2016, and related regulations:
The RP demonstrated compliance with the mandatory requirements under the IBC, 2016, and CIRP Regulations. The Resolution Plan included provisions for payment of CIRP costs, operational creditors, and employees' claims. The plan also detailed the change in management and implementation schedule.

4. The role of the Committee of Creditors in approving the Resolution Plan:
The COC's commercial wisdom in approving the Resolution Plan was emphasized. The Supreme Court rulings in Swiss Ribbons Pvt Ltd & Anr Vs. Union of India & Ors., and K. Sashidhar Vs. Indian Overseas Bank & Ors., highlighted that the COC's decisions are paramount and non-justiciable. The COC's unanimous approval of the Resolution Plan was based on their assessment and expertise.

5. Judicial review limitations of the Adjudicating Authority over the commercial decisions of the COC:
The Adjudicating Authority's power of judicial review is limited to ensuring compliance with the IBC, 2016, and regulations. The Supreme Court's ruling in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta clarified that the NCLT or NCLAT cannot override the COC's decisions. The objections raised by the ex-management were rejected as they could not challenge the COC's commercial decisions.

6. Specific compliance with the amended Form-H and performance security requirements:
The RP was directed to file an affidavit with documentary evidence regarding the extension of performance guarantee and compliance with the amended Form-H. The RP complied with the order, providing necessary documents, including bank guarantees and comfort letters. The amended Form-H indicated compliance with IBC provisions and regulations.

7. Implementation and monitoring of the Resolution Plan:
The Resolution Plan outlined the implementation period, sources of settlement, and monitoring committee's role. The RP submitted an affidavit confirming compliance with Section 29-A of the IBC, 2016. The plan included provisions for infusing capital, managing the company's operations, and repaying related parties' debts. The RP was directed to forward all records to the IBBI and ensure the Resolution Plan's effectiveness from the date of the order.

Conclusion:
The Resolution Plan was approved, binding on all stakeholders, including the Corporate Debtor, employees, members, promoters, creditors, guarantors, and the Resolution Applicant. The moratorium ceased, and the RP was instructed to forward records to the IBBI. The order was pronounced, allowing CA-441/C-III/ND/2019 filed in CP No. 22/ND/2018.