TMI Blog2017 (12) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... of IBC, 2016 with extant rules, regulations made thereunder. And the Resolution plan in question also contains all mandatory clauses as discussed supra. And there are no grounds exists for rejection of resolution plan. Therefore, we are satisfied that the Resolution plan contains all mandatory provisions and the Resolution Professional followed all the extant provisions of IBC, 2016, rules made thereunder and IBBI Rules, regulations apart from following Principles of Natural Justice. The Resolution plan in question is also prepared based on information memorandum. The Resolution Plan also provides all the required measures as mandated under Regulations 37 & 38 of IBBI (IRP for Corporate Persons) Regulations 2016. In the aforesaid facts, provisions of IBC and law, taking a practical approach considering the place in which the Unit is situated, to meet the ends of justice by exercising powers conferred upon this Adjudicating Authority, under section 31(1) of IBC, 2016, We hereby allowed the Company petition bearing CP(IB)No.11/10/HDB/2017 with the following directions: (1) We hereby approved the Resolution plan/Revised OTS scheme as submitted by the Resolution Professional-vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Process (CIRP) in respect of Kamineni Steel Power India Pvt. Ltd. 2. The Adjudicating Authority, vide order dated 10th February, 2017, admitted the Company Petition and appointed Shri C.B. Mouli as Interim Resolution Professional (IRP), and directed him to constitute a Committee of Creditors (CoC), and cause public announcement of initiation of CIRP of the Company as per the details given in section 15(1) and 15(2) on the www.ibbi.gov.in (designated website of Insolvency and Bankruptcy Board of India) etc. 3. In pursuance to the above order, the Resolution Professional, has made public announcement in Form- A in newspapers viz. The Hindu and SAAKSHI on 16th February, 2017 and it was also displayed in the IBBI website and Corporate Debtor's website as per IBC Regulations. Two (2) Registered Valuers namely M/s. Mott McDonald Pvt. Ltd., having its office at Level 4, Regus Business Centre, Gumidelli Commercial Complex, 1-10-39, to 44, Old Airport Road, Begumpet, Hyderabad-500016. Telangana, India at a remuneration of ₹ 2.50 Lakhs and another namely Servel Krishna Engineers Private Limited, having its office at C-23, Sterling Vilia, Vikrampuri, Secunderabad - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad made a presentation for resolution plan giving three options. It was discussed in detail and it was resolved to appoint SBI Capital Markets Ltd., to determine sustainable debt portion of the corporate debtor to enable the creditors to assess the viability of the resolution plan. It was resolved that Indian Bank, Lead Bankers, would fix fee to them and inform Resolution Professional who will have to appoint them for assignment to be given in a time frame of 15 days. It was resolved to have a creditors meeting to consider SBI Capital Markets Ltd. presentation and take a view in principle about the resolution plan proposed by the corporate debtor (4) 4th CoC Meeting was held on 27-6-2017 In the 4th CoC meeting held on 27-06-2017, Resolution plan submitted by Corporate Debtor was reviewed and SBI Capital Markets Limited's draft TEV report was considered and it was resolved that fresh infusion of funds of ₹ 150 Crores as projected is not acceptable if it comes as priority debt instead of equity. The Corporate Debtor shall infuse funds for working capital and the Corporate Debtor within 15 days or on or before 14th July, 2017 must come out with a concrete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plan submitted by the corporate debtor is under circulation and that corporate debtor shall improve the offer to enable to consider the resolution plan. The lending bankers of the committee indicated that the sustainable portion should be improved to 40% of the total debt. JMF ARC Limited holding 12.31% voting power had stated that they are not in favour of resolution plan submitted by the corporate debtor and they might reconsider only if the corporate debtor improves the levels of the sustainable debt. Corporate debtor was given one week's time and by 4th October, 2017 and shall circulate through email the ability to improve the levels of the sustainable debt and thereafter the committee of the creditors shall meet to take a final call on the resolution plan. The Corporate debtor had stated that during the last eight months, at any point of time, it was never suggested/indicated in the Committee of Creditors meetings to the company, that the resolution plan is required at the sustainable debt level of 40%. In view of the this development, the corporate debtor had sent a detailed mail to Lenders on 29.09.2017 explaining the entire position and with a request to gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.15 2 Andhra Bank 12.81 3 Central Bank of India 11.82 4 Oriental Bank of Commerce 10.94 5 Allahabad Bank 8.20 6 Bank of Maharashtra 6.36 TOTAL: 65.28 Corporate Debtor was asked to submit a fresh OTS proposal through email to all the bankers, which will be considered by them subject to the approval from their respective sanctioning authorities. Resolution Professional had expressed that Hon'ble NCLT Hyderabad Bench had given an extension of time to the members to go to their respective sanctioning authorities and now a fresh proposal for resolution plan would not meet statutory time period. The Corporate Debtor on 18-10-2017 sent a mail submitting the following OTS Scheme proposal as an alternative to the resolution plan already submitted and pending with the lenders for disposal, subject to approval of all financial creditors and Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able in three half-yearly instalments (25% - Sept'18/30% - March'19/30% - Sept'19) with grace period for the last payment by 1 month (till Oct'19), if necessitated. d. Interest Rate - Lead bank 1 year MCLR +2% (10.35%). Simple interest to be charged on the outstanding amount from 1/4/2018 on reducing balance basis. and requested to place the above OTS proposal before this Tribunal for obtaining necessary confirmation and approvals from the COC of lenders. e. After receiving the mail the RP sent mails to the members of the CoC informing the Resolution Plan to be considered on 27-10-2017 when the 9th CoC meeting was convened with the permission from the members for a shorter notice u/s Regulation 19(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (9) 9th CoC meeting was held on 27-10-2017 with members having 100% voting power (a) The Resolution Plan presented by the Resolution Professional based on the e-mail sent by the Corporate Debtor on 26-10-2017 late in the evening based on the suggestions in the JLF Meeting, which was immediately circulated to the Members of the CoC, was approved by members of CoC having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017. S.No. Name of the Bank % of Voting Power 1 Indian Bank 22.33 2 JM Financial Asset Reconstruction Company Ltd. 12.39 3 Allahabad Bank 8.20 4 Andhra Bank 12.81 5 Oriental Bank of Commerce 10.94 Total 66.67 (f) The Percentage of Dissenting Lender Banks nor approving the Resolution Plan by way of OTS as on 30-10-2017 S. No. Name of the Bank % of Voting Power 1 Indian Overseas Bank 15.15 2 Central Bank of India 11.82 Total 26.97 (g) The Percentage of Lender Banks remained OPEN for the approval of the Resolution Plan by way of OTS as on 30-10-2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to the decision taken by the largest percentage of the financial creditors . ( iii) The RBI vide its notification No.: 2016-17/299 Dated May, 2017 vide DBR.BP.BC.No.67/21.04.048/2016-17, in exercise of the powers conferred by Secs. 21, 35A and 35AB of the Banking Regulation Act, 1949, Where in the context of JLF Meeting notified as under: In Para 4. In this context, it is reiterated that lenders must scrupulously adhere to the timelines prescribed in the frame work for finalizing and implementing the Corrective Action Plan (CAP). To facilitate timely decision making, it has been decided that, henceforth, the decisions agreed upon by a minimum of 60 per cent of creditors by value and 50 per cent of creditors by number in the JLF would be considered as the basis for deciding the CAP, and will be binding on all lenders, subject to the exit (by substitution) option available in the frame work, lenders shall ensure that their representatives in the JLF are equipped with appropriate mandates, and that decision taken at the JLF are implemented by the lenders within the timelines. In para 5 it shall be noted that The stand of the participating banks while vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is minimal and the value of the unit should be better than the enterprise valuation given by the valuer. As per the Audited Balance Sheet of the Company for FY 2015-16 the Net Block of Fixed Assets have been valued at ₹ 1011.71 crores whereas the enterprise value arrived by Mott McDonald is ₹ 873.62 crores. Furthermore the Realizable Value of unit as per valuations obtained by the Resolution Professional during April 2017 from Servel Krishna Engineers Limited and True Valuers and Engineers is ₹ 786.90 crores and ₹ 735.75 crores respectively. It may be observed here that the various valuations obtained show significant variance in the value of the unit and as per the IBC, 2016 the average of two closest estimates is to be considered as the liquidation value. The OTS value offered by the company is still significantly lower than the expected liquidation value. 12. The Promoter/Director of the company, Dr. K. Shashidhar who has extended his personal guarantee for the captioned account is a highly resourceful individual and the same may be observed from MCA portal that Dr. Shashidhar is also a director in 9 other group companies. The Corporate Guaran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. (Section 30(2)(a) of IBC). (b) That Payment to the operational creditors shall be made in a staggered manner after payments to the financial creditors in the usual course of business. (Section 30(2)(b) of IBC). (c) That the management of the affairs of the Company shall be done by the existing management team after approval of the resolution plan. (Section 30(2)(c) of IBC). (d) That the implementation and supervision plan will done by the Resolution Professional as approved by the CoC in its meeting held on 16.10.2017 in compliance with section 30(2)(d) of the IBC and Regulation 38 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (e) That there is no contravention to any provisions of applicable laws for the time being in force. (Section 30(2)(e) of IBC). (f) That the liquidation value due to dissenting financial creditors will be provided that such payment is made before any recoveries are made by the financial creditors, who voted in favour in accordance with the Regulation 38(c) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution process for Corporate Persons) Regulations, 2016. 16. In the light of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... algonda District and is creating lot of direct and direct employment to many in the locality and nearby villages of Narektpally Mandal. 20. It is contended by Shri D. Venkata Ramana, Zonal Manager, Indian Overseas Bank that their Bank has decided to reject the OTS offer of ₹ 600 crores submitted by the Company as a Resolution Plan, by stating the following issues and other dissenting banks have also taken similar grounds to reject the plan:- (a) Guarantors Issue: The Resolution Professional and the lead bank completely ignored the rights of the Bank and other Banks insofar as liability of the Corporate Guarantors and personal guarantors are concerned and it should be rejected for not factoring in the liabilities of the corporate guarantors and personal guarantors and evaluation of their respective assets. Any effort by the borrower to deny the legitimate rights of our Bank and other lenders and coercing the lenders by completely letting off corporate guarantors and personal guarantors is illegal and void under law. He further submits that the proposal demands huge sacrifices from the Bank as well as other lenders amounting to about ₹ 1000 crores and assumin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian bank, Indian Overseas Bank, The Karur Vysya Bank Limited and Oriental Bank of Commerce with Indian Bank as Leader. (2) There were several issues and continuous delay in sanction/consideration of company's loan proposal at various stages during pre and post implementation of this project till date by some of the consortium banks, disregarding the spirit of consortium. (3) RBI introduced Joint Lenders Forum (JLF) and Corrective Action Plan (CAP) for Revitalizing Distressed Assets in the Economy and accordingly issued a detailed circular vide DBOD.BP.BC.No. 97/21.04.132/2013-14 dated 26.02.2014. (4) Accordingly the JLF was formed on 19.05.2014 by the consortium of banks for implementation of CAP for this unit. Subsequently RBI has come forward with a scheme of Flexible Structuring of the existing Long Term Project loans to Infrastructure and Core Industries vide circulars No.DBR.No.BP.BC.53/21.04.132/2014-15; dated 15th July, 2014. (5) As the company was eligible for implementation of the above restructuring scheme suggested by RBI, the same has been discussed in the consortium meeting of the bankers held during April-2015 and as advised, the company has submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tailed reply to Indian bank on 02.04.2016, clarifying the position and our comments, on the observations made in AQR of RBI. (9) As the lenders have abruptly and unilaterally stopped the operations in the working capital loan account, the unit could not function further and generate need based cash surplus to repay further dues to the member banks of the consortium, which has resulted the accounts became NPA in other banks. (10) It is stated that the Company had made a payment of about ₹ 421 Crores towards interest and other finance cost to the Financial Creditors, from the amounts released by the banks in the term loan and working capital limits. Hence in a nutshell this amount has not been utilized for the effective operations/functioning of the company's unit. 22. The Company has earlier filed an application with BIFR on 15.11.2016 which got abated because of Notification dated 25th November, 2016 as to repeal of SICA Repeal Act, 2003, so the present petition is filed. 23. During the course of resolution process since Feb-2017 the company has submitted various resolution plans from time to time as advised by Committee of Creditors (CoC). Three resolution pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unlike other legislations such as The Recovery of Debts due to Banks and Financial Institutions Act, 1993 or The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which are Acts serving the purpose for which it is enacted i.e Recovery . Shed tear, salvage and get what is possible, bear the losses on loss on sale of assets. The IBC 2016 not only is Prescribing the Actions of the stakeholders but also in detail, provide for the Procedure under which stakeholders should Act for Resolution of Insolvency, Liquidation Or Bankruptcy, situation and how it (resolution or liquidation) Should be conducted . It is a Comprehensive legislation, Consolidating solvency statutes into one single Legal ecosystem resolving the issue of solvency to the jurisdictions the Code applies. It also define the Procedures prescribed for the Conduct of the Ecosystem relating to the solvency issues. The code has to be interpreted bearing in mind the following judgment: Manilal Shah v. Sardar Saved Ahmed (1955) 1 SCR 108, the Hon'ble Apex Court held that where statute itself provide consequences of breach or non-compliance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules and Regulations made thereunder are required to be analyzed. Section 30 of IBC deals with the submission of resolution plan and section 31 deals with the approval of resolution plan and those provisions are extracted below for ready reference: (1) Submission of resolution plan: Section 30. (1) A resolution applicant may submit a resolution plan to the resolution Professional prepared on the basis of the information memorandum. (2) The resolution Professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the repayment of other debts of the corporate debtor; (b) provides for the repayment of the debts of operational creditors in such manner as may be specified by the Board which shall not be less than the amount to be paid to the operational creditors in the event of a liquidation of the corporate debtor under section 53; (c) provides for the management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the implementation and supervision of the resolutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s period. 2. The resolution Professional shall exercise powers and perform duties as are vested or conferred on the interim resolution Professional under this Chapter. 3. In case of any appointment of a resolution Professional under sub-section (4) of section 22, the interim resolution Professional shall provide all the information, documents and records pertaining to the corporate debtor in his profession and knowledge to the resolution Professional. (4) Meeting of committee of creditors. Section 24: 1. The members of the committee of creditors may meet in person or by such electronic means as may be specified. 2. All meetings of the committee of creditors shall be conducted by the resolution Professional. 3. The resolution Professional shall give notice of each meeting of the committee of creditors to- (a) members of Committee of creditors; (b) members of the suspended Board of Directors or the partners of the corporate persons, as the case maybe; (c) operational creditors or their representatives if the amount of their aggregate dues is not less than ten per cent of the debt. 4. The directors, partners and one representative of operational credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tronic form to each member of the committee of creditors and any Ootential applicant and the information memorandum should contain the following details of the corporate debtor. Resolution Plan: A Corporate Insolvency Resolution Plan means a plan proposed by any person who shall be deemed as resolution applicant for insolvency resolution of the corporate debtor as a going concern in accordance with Part II of the Code. For the purpose of formulation of a resolution plan, the resolution Professional shall prepare and submit an Information Memorandum in electronic form to each member of the committee of creditors and any potential applicant. Information Memorandum: (1) The information memorandum prepared by the resolution Professional shall contain the following details of the corporate debtor: a. assets and liabilities, as on the insolvency commencement date, classified into appropriate categories for easy identification, with estimated values assigned to each category; b. the latest annual financial statements; c. audited financial statements of the corporate debtor for the last two financial years and provisional financial statements for the current financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Bankruptcy Code, 2016 (31 of 2016), the Insolvency and Bankruptcy Board of India hereby makes the following Regulations, namely- The following are the relevant regulations to the issue of Corporate Insolvency Resolution Process, which is subject matter in the present case. The Regulations 6,7,8,17,18,22,25,35,36,37,38,39 are reproduced below: Requlation-6: Public announcement. 1. An insolvency Professional shall make a public announcement immediately on his appointment as an interim resolution Professional. Explanation: 'Immediately' means not later than three days from the date of his appointment. 2. The public announcement referred to in sub- regulation (1) shall: (a) be in Form A of the Schedule; (b) be published- (i) in one English and one regional language newspaper with wide circulation at the location of the registered office and principal office, if any, of the corporate debtor and any other location where in the opinion of the interim resolution Professional, the corporate debtor conducts material business operations; (ii) on the website, if any, of the corporate debtor; and (iii) on the website, if any, designated by the Board for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-payment of a debt, if any. Regulation.17: First meeting of the committee: (1) The interim resolution Professional shall file a report certifying constitution of the committee to the sjj Adjudicating Authority on or before the expiry of thirty days from the date of his appointment. (2) The interim resolution Professional shall convene the first meeting of the committee within seven days of filing the report under this Regulation. Regulation.18: Meetings of the Committee: A resolution Professional may convene a meeting of the committee as and when he considers necessary, and shall convene a meeting if a request to that effect is made by members of the committee representing thirty three per cent of the voting rights. Regulation.22: Quorum at the meeting:- (1) A meeting of the committee shall be quorate if members of the committee representing at least thirty three per cent of the voting rights are present either in person or by video conferencing or other audio and visual means: Provided that the committee may modify the percentage of voting rights required for quorum in respect of any future meetings of the committee. (2) Where a meeting of the commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may appoint another registered valuer who shall submit an estimate computed in the same manner; and (c) the overage of the two closest estimates shall be considered the liquidation value. 3. The resolution Professional shall provide the liquidation value to the committee in electronic form. Regulation.36: Information memorandum: - 1. Subject to sub-regulation (4), the interim resolution Professional or the resolution Professional, as the case may be, shall submit an information memorandum in electronic form to each member of the committee and any potential resolution applicant containing - (a) at least the matters listed in paragraphs (a) to (i) of sub-regulation (2), before its first meeting; and (b) matters listed in paragraphs (j) to (1) of sub-regulation (2), within fourteen days of the first meeting. 2. The information memorandum shall contain the following details of the corporate debtor - (a) assets and liabilities, as on the insolvency commencement date, classified into appropriate categories for easy identification, with estimated values assigned to each category; (b) the latest annual financial statements; (c) audited financial statements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquisition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons; (d) satisfaction or modification of any security interest; (e) curing or waiving of any breach of the terms of any debt due from the corporate debtor; (f) reduction in the amount payable to the creditors; (g) extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor; (h) amendment of the constitutional documents of the corporate debtor; (i) issuance of securities of the corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other appropriate purpose; and (j) obtaining necessary approvals from the Central and State Governments and other authorities. Regulation.38. Mandatory contents of the resolution plan:- (1) A resolution plan shall identify specific source of funds that will be used to pay the - (a) Insolvency resolution process costs and provide that the insolvency resolution process costs will be paid in priority to any other creditor; (b) Liquidation value due to operational creditors and provide for such payment in priority to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the management or control of the business and operations of the corporate debtor after a resolution plan is approved by the Adjudicating Authority, may make an application to the Adjudicating Authority for an order seeking the assistance of the local district administration in implementing the terms of a resolution plan. 26. Background of the Company (a) So far as the background of the Company concerned here, as stated supra, the Company is promoted by USAIPL, a Kamineni group company having stake of 99.98% with a total project cost of ₹ 1532 crores (Rs.655 crores for steel and ₹ 877 crores for power) out of which the total debt is ₹ 1248 crores (Rs.531 crores for steel and ₹ 717 crores for power). The total Equity is ₹ 286 crores (steel ₹ 126 crores and power ₹ 160 crores). Steel division commenced its operation on 30.03.2013. (b) The Company is situated at Sreepuram Village, Narketpally Mandal, Nalgonda District, Telangana. The Company was functional till the financial year 2014-15 and, it could not continue due to shortage of working capital and various other factors which includes mismatch of cash flow and financial crises lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voting power, whereas IOB, CBI and BOM which constitute 33.33% have not approved the plan. The Indian Bank having voting power of 22.3%, the major lender and lead Bank has approved this plan. 28. Our observations: Our observations are majorly classified into 6 heads and are discussed in detail below: 1. Committee of Creditors Meetings: a. It is not in dispute that the IRP approved by the Tribunal was duly approved by the CoC. As stated supra, all the meetings of CoC have been attended by all the CoCs except for one i.e. 2nd CoC which is also attended by more than 75% of CoC. Upon perusal of the proceedings of the CoC, it shows that the Resolution Professional has prepared the resolution plan strictly in accordance with law. There are various options as proposed by Resolution Applicant were placed and considered by CoC and ultimately the present resolution plan with OTS of ₹ 600 crores is emerged which accepted by five Banks. The Resolution Professional, who is having experience in insolvency procedure and duly approved by the IBBI, is competent to analyze the pros and cons of Resolution plan and submit his views on the issue and then Adjudicating Authority i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r competent authorities. The same is also not in conformity with the RBI Notification issued in May 2017 that their representatives are equipped with appropriate mandates. The Boards shall empower their executives to implement the JLF decision without requiring further approval of the Board. e. Though it was recorded in the meeting of the 6th CoC held on 24.08.2017 All the members of the CoC shall be ready with their mandate to approve or otherwise . However, from the minutes of the last CoC and other records submitted it was observed that the 9th CoC held on 27.10.2017, whereas the members of CoC have conveyed their approval by way of e-mail/letter only subsequent to that meeting, which is also not in accordance with their own decision as recorded in the 6th CoC as stated above. f. Voting by the Committee as per Regulation 25(3) and (4), the Resolution Professional shall take a vote of the 'members of the committee and at the conclusion of the meeting the Resolution Professional shall announce the decision taken on each item along with the names of the members of the committee who voted for or against the decision, or abstain from voting. However, as per the records s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt quoted/expected by the Banks, the promoter is also handicapped to afford any further plans/future course by way of additional instruments like equity shares, preference shares, convertible debentures, bonds etc., to satisfy the expectations of the Banks. d. Adjudicating Authority granted sufficient time of hearing to the Bank officials on two occasions each on Friday and Monday (3rd and 6th of Nov, 17) to arrive at a conclusion/reconsider the revised OTS proposal. During the hearing held on 06.11.2017, Senior Officials of all the three dissenting Banks in the rank of GMs were requested to be present and assist Adjudicating Authority to arrive at a resolution for the issue in question, since the last date even as per the extended time line of 270 days is on 07.11.2017 Accordingly, GMs of all the three Banks were present. However, the Adjudicating Authority surprisingly noted that in spite of spending considerable time, given the whole picture of the need for resolution of Corporate Debtor which had provided direct employment opportunity to around 450 employees till recently and a number of indirect employees/families/beneficiaries, possible contribution by way of revenue to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue will be more than the average of two of the registered valuers and the average amount works out to ₹ 761 Crores approximately based on the same set of information/facts. Interestingly, another registered valuer who valued the enterprise value of the same corporate debtor arrived at an amount of ₹ 873.62 crores, which is more than ₹ 112 crores of the average value. This itself establishes that the liquidation value/estimated realisable value cannot be the same for all the valuers and the same is to true/applicable to the financial creditors/lenders as well. Therefore, it would be prudent to go with the decision of the majority especially in this case wherein 2/3rd of total voting share of the Financial Creditors have approved the revised OTS. i. As per the revised debt outstanding, submitted by the RP vide written submission dated 31.10.2017, an amount of ₹ 187.05 crores is the debt outstanding to JMF ARC Limited, an amount of ₹ 228.26 crores to IOB, an amount of ₹ 178.36 crores to Central Bank of India and an amount of ₹ 96 Crores to Bank of Maharashtra. As discussed supra even the private sector ARC whose outstanding debt amount is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total voting share of the Financial Creditors or those present during meetings of respective CoC of Financial Creditors. Since IBC is a new Code and still evolving, the above percentage has to be read with various circulars issued by the Reserve Bank of India, which is the Regulator for the Banking sector. The RBI vide its letter No. RBI/2015-16/101 dated 01.07.2015 has circulated master circular with regard to the Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances, to all commercial banks. As per the circular, the objective of Corporate Debt Restructuring (CDR) framework is to ensure timely and transparent mechanism for restructuring the Corporate Debts of viable entities facing problems outside the purview of BIFR, DRT and other legal proceedings for the benefit of all concerned. It aims at preserving viable corporate that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme. The CDR standing forum would be representative general body of all financial institutions and banks participating in CDR system. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 of the Act, power has been conferred on Reserve Bank to control Advances by Banking Companies. Government of India, Ministry of Finance also issued regulations dated 05th May, 2017 promulgating Banking Regulations (Amendment) Ordinance, 2017 in order to enable the Union Government to authorize Reserve Bank of India to direct Banking Companies to resolve specific stressed assets. Accordingly, it has inserted two sections viz 35AA and 35AB after section 35A of Banking Regulation Act,'1949. As per this ordnance, RBI will be empowered to intervene in specific cases of resolution of non-performing assets, to bring them to a definite conclusion. It says that Government is committed to expeditious resolution of stressed assets in banking system. The recent enactment of Insolvency and Bankruptcy Code, 2016 has opened up new possibilities for time bound resolution of stressed assets. The SARFAESI and Debt Recovery Acts have been amended to facilitate recoveries. A comprehensive approach is being adopted for effective implementation of various schemes for timely resolution of stressed assets. Before the introduction of IBC 2016, Stressed Assets Resolution Mechanism was among other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lvency of a Company and it is only last and final option, after exhausting all options available for it, to order for liquidation. In order to resolve the issue of insolvency, it is necessary to bank upon various guideline/circulars issued by RBI from time to time. So it is not out of context to refer to various percentages prescribed by RBI as discussed above. The counsel for the lead banker also submitted that the Committee of Creditors contemplated under IBC is akin to JLF and that of Resolution Plan is akin to CAP. e. Adjudicating Authority spent considerable time and heard the matter on 03.11.2017 and 06.11.2017 on two occasions on each day i.e. to ensure that the Resolution Plan is being approved and the Corporate Debtor is being revived rather than going for liquidation. As generally known, in most of the cases the liquidation, value will not match with the outstanding loan amount (including interest) especially in the case of distressed sale. 4 . IBC Code: a. The main preamble of the IBC is the resolution of the Corporate Debtor rather than the liquidation of the Corporate Debtor. As per the stringent stand of these 3 dissenting Banks it clearly shows that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CM (Law) (Indian Bank), Shri B. Ratan Kumar, G.M (Central Bank of India), Shri Y. Anil Kumar, AGM (Central Bank of India) and Ms. Renuka, CM (Central Bank of India). b. The case was listed before the Adjudicating Authority on various dates viz., 10.02.2017, 13.03.2017, 21.03.2017, 02.06.2017, 10.07.2017, 7.07.2017, 27.07.2017, 28.07.2017, 15.09.2017, 03.10.2017, 09.10.2017, 20.10.2017, 02.11.2017, 03.11.2017 and on 06.11.2017. On 03.11.2017 and 06.11.2017 hearings were held on 4 occasions. c. In the IBC at various places the word may and shall are used. However, Section 30(4) states that the CoC may approve the resolution plan by a vote of not less than 75% of voting shares of the financial creditors. Further, under Section 31 it is provided that if the adjudicating authority is satisfied .... . Therefore, we are of the considered view that even though the CoC may approve a resolution plan with not less than 75% of the voting share, a discretion is given to the Adjudicating Authority to approve the Resolution Plan. d. Even Sub-Section (2) of Section 31 of IBC gives a discretion any power to the Adjudicating Authority to reject the resolution plan even if it does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l area of newly constituted Telangana State, as explained supra? So it is bounden duty of Adjudicating Authority to analyze the issue in question in wider/macro prospective and transparent way rather in a mechanical way depending on percentage or the word 'may' as used in under section of 30(4) of IBC so as to balance the interests of all the stakeholders such as employees, creditors, public interest, economy, rural development etc. h. It is also relevant to point out here the observation of Hon'ble Supreme Court of India in Jamaluddin Ahmad v Abu Saleh Najmuddin which is extracted as follows: the relevant obiter or ratio: '14. The judicial function entrusted to a Judge is inalienable and differs from an administrative or ministerial function which can be delegated or performance whereof may be secured through authorization. The judicial function consists in the interpretation of the law and its application by rule or discretion to the facts of particular cases. This involves the ascertainment of facts in dispute according to the law of evidence. The organs which the State sets up to exercise the judicial function are called courts of law or courts of just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iciter. It can safely be left to be performed by one of the administrative or ministerial staff of the High Court which is as much a part of the High Court. It may be delegated or be performed through someone authorized. i. In the matter of Prowess International Pvt. Ltd v. Parker Hannifin India Pvt. Ltd. the Hon'ble NCLAT reiterated; it is made clear that Insolvency Resolution Process is not a recovery proceeding to recover the dues of the creditors Resolution maximises the value of assets of the corporate and enables every stakeholder to continue with the corporate to share its fate. Therefore, maximization of value of assets and balancing the interests, resolution triumphs over recovery as well as liquidation in most cases. 6. Banking Sector: As generally known in the Banking/Corporate Sector, if any compromise has to be arrived at either party will incur a loss/forgo to certain extent in the process of negotiation, even the aggrieved party/the lender also has to quote the acceptable amount of settlement with attending terms and conditions to resolve the issue. However, in the instant case, strangely all the three (3) Banks did not quote the acceptable amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India for the year 2016-17. For the benefit of all stakeholders, important/relevant portion of speech of CMD of CBI addressed to the shareholders are added/quoted. The Bank continued to strategies its focus on recoveries which yielded better results during the year, Cash recovery increased to ₹ 2378 crores in the financial year ended 31.03.2017 as compared to ₹ 1287 crores in the previous financial year ended 31.03.2016, registering a growth of 84.77%. The Banking industry faces challenges from mounting NPA and Resolution thereof. Further, he also stated that IBC, 2016 should speed up the recovery process. Asset quality has been the concern of the Bank for last couple of years. Net NPA to net Advances increased to 10.20% as on 31.03.2017 from 7.36% as on 31.03.2016. The Bank has been proactive in respect of NPA management and shall continue its efforts to reduce the NPA level. The Bank has made provisions for NPAs for the year ending 31.03.2016 an amount of ₹ 4,913 crores and an amount of ₹ 6,216 crores for the year ending 31.03.2017. The RBI has also revised the characteristics of Prompt Corrective Action (PCA) and stressed on asset quality and profitabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... senting Banks submitted that the personal guarantee of the promoter, the guarantee given by the other corporates have not been considered by the resolution Professional/in the OTS Scheme. However, we are of the view that even the lead bank of the consortium of Banks i.e. Indian Bank and other PSBs and even the Private Sector ARC have not stressed on this issue. During the hearings held, the financial creditors have orally indicated that even if those guarantees are considered the same is not more than ₹ 30 crores approximately, which should not deter the current OTS proposal. Having seen merits in their submissions, the Adjudicating Authority is of the view that the personal guarantee, the guarantee given by the other corporates can be suitably dealt with by the lenders as per their loan agreements in addition to the current OTS Scheme. In most of cases, the liquidation value may not match the actual outstanding debt amount and the lenders either PSBs, Financial Institutions, ARCs etc. have to absorb some losses and in reality, have been absorbing some losses or to take some haircut. Even, the Government both Central and State also forgoes their dues especially tax dues, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that, the Balance Sheet of Corporate Debtor as at 31.03.2016 did not contain any amount towards IPR, therefore, the submission of IOB before the Adjudicating Authority is without any basis or only based on assumptions. 31. With regard to the issue of source of funds, the financial creditors should have taken up the issue with the Resolution Professional and in the CoC meetings. It is also noted that in the instant case 9 (nine) CoC meetings were conducted and therefore, the issue of source of funds should have been discussed/sorted out in the CoC meetings rather than bringing the same as an issue before the Tribunal as a reason for rejecting the Revised OTS Scheme. However, it is noticed that in the 6th CoC meeting held on 24.10.2017, the corporate debtor also submitted an EOI from AREA Group of Companies to infuse ₹ 150 crore as an equity share capital, preference share capital, debentures subject to getting firm approval from the lenders. As can be seen from the above discussions, the revised OTS Scheme is yet to be approved, therefore, it would be difficult to firmly tie-up the entire source of funds required in the absence of approval granted by financial creditors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OTS of ₹ 600 crores is accepted by five banks. It is also to be mentioned here that there is a quorum prescribed for meeting of CoC and all the meetings of CoC satisfy the quorum and thus committed is competent to take appropriate decision and all the members of Committee of Creditors are supposed to attend the meetings with appropriate mandates from their headquarters. However, the records shows that though the Committee of Creditors have attended all the meetings, they have kept uncertainty pending till 180+90 days period prescribed under the Code, forcing the Tribunal to call all concerned parties to depose before the Tribunal as detailed in this order. 33. It is necessary to advert to the contentions of the three dissent banks for non-approval of the plan. However, all the Banks have not filed any documents in support of their contentions. As stated supra, all the Banking Sector in the Country are bound by various guidelines/circulars issued by RBI from time to time and also the policy of Government of India as detailed supra.'It is also relevant to point here that dissenting Banks are also governed by same set of rules/guidelines as followed by other five bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt of copy of this order; (3) We hereby direct that the Resolution Plan/Revised OTS Scheme of the Corporate Debtor shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. (4) We also hereby direct the Corporate Debtor, as promised by the Managing Director, to reinstate all the 450 employees, who were on the rolls of the Company (both skilled 325 and unskilled 125 workers) before stopping the operations of the Company, however, subject to their eligibility/fitness; (5) We direct the corporate debtor to pay the amount of ₹ 0.13 crores to other Operational Creditors at the time of making initial payment of 5% of OTS Scheme and the balance amount towards electricity dues should be paid in equal instalments along with the payments to be made to the financial creditors as per payment schedule in the revised OTS scheme. Since total dues to operational creditors is ₹ 14.36 crores, out of which ₹ 0.13 crores is for other operational creditors and ₹ 14.23 crores is towards electricity dues to TSSPDCL. (6) We hereby directed the Resolution Professional to forward ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
