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TMI Blog2017 (12) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... ebruary, 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 Rs. 2.50 Lakhs and another namely Servel Krishna Engineers Private Limited, having its office at C-23, Sterling Vilia, Vikrampuri, Secunderabad - 500009 on a remuneration of Rs. 1.50 Lakhs are appointed. 4. Since the Corporate Insolvency Resolution Process could not be completed withi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainable 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 Rs. 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 resolution plan including offering OTS acceptable to the lenders and present to the core committee of the Creditors and upon in-principle approval by the core committee of the credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stainable 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 give their valuable inputs and suggestions with clarity on the above subject, keeping in view of the viability of the unit and SBI Capital Markets Limited final TEV study report, before 04.10.2017, so as to enable them t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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'ble NCLT, and offered the following terms: Sl. No. Particulars Details 1 One time Settlement (OTS) proposal for the All banks put together Rs.525.00 Crores 2 1st Instalment for the OTS proposal to be paid 10% of the OTS amount by 31st March, 2018 3 Balance payment of the OTS proposal to be done in the following manner FY-2018-19-H1-30.09.2018 20% of OTS amount FY-2018-19-H2-31.03.2019 20% of OTS amount FY-2019-20-H1-30.09.2019 25% of OTS amount FY-2019-20-H2 By 31.12.2019 25% of OTS amount 4 Repayment period ** Structured Repayment per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer: S.No Name of the Bank % of Voting Power 1 Indian Bank 22.33 2 JM Financial Asset Reconstruction Co. Ltd. 12.39 3 Allahabad Bank 8.20 4 Andhra Bank 12.81 Total 55.73 Had submitted their in principle approval from their Sanctioning Authorities and Indian Bank confirmed by their letter: IBHYDMAIN:KSPLOTS 2017-18 dated 27-10-2017 & Allahabad Bank by way of mail dated 27-10-2017 confirmed subject to providing final sanction after getting sanction from appropriate authorities fr the same is accepted by majority of the Lenders. (b) Indian Overseas Bank having voting power of 15.15% rejected the Resolution Plan by way of revised OTS, and cited reasons for rejection by way of letter IOB/LCB/NPA/o1/2017-18, dated 27-10-2017. (c) The in principle approvals by the members of CoC having voting power of 29.12% expressed that they remain OPEN awaiting the in principle approval from their respective sanctioning authorities. S.No. Name of the Bank % of Voting Power 1 Oriental Bank of Commerce 10.94 2 Central Bank of India 11.82 3 Bank of Maharashtra 6.36 Total 29.12 (d) On 30-10-2017, Oriental Bank of Commerce having 10.94% voting power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thus Resolution is in accordance with law and it may be approved by the Tribunal/Adjudicating Authority. He has also relied upon the following judgments and guidelines/notifications of Reserve Bank of India:- (i) The Observations of the NCLT Mumbai Bench in the matter of Raj Oil Mills Ltd and Edelwise Asset Reconstruction Company Ltd, based on the observations by the Hon'ble Supreme Court in the cases of Bachandevi v. Nagar Nigam, Gorakhpur reported in [2008] 12 Supreme Court case 372, relevant paras 18 to 21 and Sarladevi v. Kishan Chand, reported in [2009] 7 Supreme Court cases 658. (ii) The NCLT Mumbai Bench in the matter of Raj Oil Mills Ltd. and Edelwise Asset Reconstruction Company Limited while dealing with the section 22 of I&B Code, 2016 in para 8.1 observed that "the term 'may' used has prescribed a jurisdiction to deal with the issue of percentage of voting share depending upon the facts and circumstances of each case" and in Para 8.2 expressed an opinion that "a viable solution is to give the preference 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 v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal creditors - Rs. 0.13 cr. (iii) Statutory Dues - NIL (iv) Dues to Employees - NIL The operational creditors shall be paid in a staggered manner after payment to financial creditors in the usual course of business. There are creditors for capital expenditure which shall also be paid from operational cash flows in the normal course of business. 10. The Resolution in question was rejected only by the following Financial Creditors out of total of Financial Creditors: Indian Overseas Bank 15.15% Central Bank of India 11.82% Bank of Maharashtra 6.36% 11. Indian Overseas Bank having voting power of 15.15% rejected the Resolution Plan by way of OTS, and cited following reasons vide their letter IOB/LCB/NPA/01/2017-18 dated 27-10-2017: The company is a fairly new unit and has operated only for few months. Hence the wear and tear 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 Rs. 1011.71 crores whereas the enterprise value arrived by Mott McDonald is Rs. 873.62 crores. Furthermore the Realizab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution process for Corporate Persons) Regulations, 2016. And is not prejudicial to their interest's as in the case of "Kamineni Steel and Power India Private Limited" the average liquidated value as determined by the two Registered Valuers is more than the OTS Amount settled. 15. It is further contended that: (a) As per provisions of section 30(2) of IBC, and Regulation 38 & 39(4) of the IBC (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, that the contents of the revised resolution plan meet all the requirement of the IB Code having provided for settling of the Insolvency Resolution Process costs which includes (a) Resolution Professional fees (b) essential staff salaries and factory maintenance costs. (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) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for own and their family livelihood. 19. Once the Resolution Plan is approved and put in place the company shall commence its operations which will increase manufacturing activity in the area and save the livelihood of around 450 workforce and their family members, in addition the manufacturing activity shall improve exports & foreign earning to the country. This manufacturing activity in the company will create lot of indirect jobs/employment to hundreds of people in and around the area mostly from villages in Narketpally Mandal, in the connected industries and ancillary units. The manufacturing activities will also going to increase the direct and indirect taxes revenue to both State & Central Government and local bodies. This is the only major industry in the Narketpally Mandal, Nalgonda 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 Rs. 600 crores submitted by the Company as a Resolution Plan, by stating the following issues and other dissenting banks have also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Private Limited Company in the State of Andhra Pradesh on 20.10.2008 with an immediate object to set up a manufacturing facilities for the production of Steel Billets with an installed capacity of 360,000 MTPA and a captive gas based power plant of 220 MW, near Sreepuram, Narketpally Mandal, Nalgonda District, Telangana. The original project cost estimated at Rs. 1539 Crores had been funded by term loans of Rs. 1248 crores by 8 consortium banks with Indian Bank as Leader and balance to be met by promoters by way of equity to the tune of Rs. 291 crores. The total debt comprised of senior debt of Rs. 1151 crores and subdebt of Rs. 97 crores and consortium banks include Andhra Bank, Allahabad Bank, Bank of Maharashtra, Central bank of India, Indian 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same even after two years. (8) While Flexi Restructuring Scheme proposal is under process of implementation by some of the banks including Indian bank, during the consortium meeting held on 25.02.2016, it was informed by a Indian Bank, that the account has become NPA in their books as on 01.11.2014, under Asset Quality Review (AQR) of RBI from 01.11.2014 and the same was informed to the company and other banks vide their letter dated 10.03.2016. It was nowhere mentioned in Indian Bank's letter, that the account had become NPA due to non- payment of interest/instalment at any point of time and it is due to technical reasons i.e., because of Date of Commercial Commencement of Operations (DCCO) issue. The Company had given a detailed 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2017. By judgment dated 20th September, 2017 held: "32. The 'l&B Code' is a complete Code by itself". The provision of the Power of Attorney Act, 1882 cannot override the specific provision of a statute which requires that a particular act should be done by a person in the manner as prescribed thereunder. When the code is being acknowledged and upheld as complete legislation on its own right in the above cited judgment the fact that code has been fundamental in raising the Rank of Ease of Doing Business in the country; it is logical that the words and phrases used in the Code be understood and aligned to the objectives of the Code and purpose of it being enacted. 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 whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mish. The determination of the question whether a provision is mandatory or directory would, in the ultimate analysis, depend upon the intent of the law maker and that has to be gathered not only from the phraseology of the provision but also by considering its nature, its design and the consequences which would follow from construing it in one way or the other. 25. After considering the pleading of parties, the issues to be considered in the case is whether resolution plan submitted by the Resolution Professional is in accordance with extant provisions of IBC 2016 and the Rules and Regulations made thereunder. The following provisions under the IBC and the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority under section 14 shall cease to have effect; and (b) the resolution Professional shall forward all records relating to the conduct of the corporate insolvency resolution process and the resolution plan to the Board to be recorded on its database. (3) Resolution Professional to conduct corporate insolvency resolution process in accordance with section 23 & 24 which are extracted below: Section 23: 1. Subject to section 27, the resolution Professional shall conduct the entire corporate insolvency resolution process and manage the operations of the corporate debtor during the corporate insolvency resolution process 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 me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to share relevant information with third parties unless clauses (a) and (b) of this sub section are complied with. Explanation.- For the purposes of this section, "relevant information" means the information required by the resolution applicant to make the resolution plan for the corporate debtor, which shall include the financial position of the corporate debtor, all information related to disputes by or against the corporate debtor and any other matter pertaining to the corporate debtor as may be specified. The Resolution Professional shall prepare and submit an information memorandum in electronic 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 29(2). (4) A member of the committee may request the resolution Professional for additional information. If such information has a bearing on the resolution plan, the same shall be provided to him within a reasonable time. (5) Insolvency and Bankruptcy Board of India has made consequential regulations for corporate Insolvency resolution process vide Notification dated 30th November, 2016 IBBI/2016-17/GN/REG004.- In exercise of the powers conferred under sections 5, 7, 9, 14, 15, 17, 18, 21, 24, 25, 29, 30, 196 and 208 read with section 240 of the Insolvency 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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial creditor may be proved on the basis of - (a) the records available with an information utility, if any; or (b) other relevant documents, including- (i) a financial contract supported by financial statements as evidence of the debt; (ii) a record evidencing that the amounts committed by the financial creditor to the corporate debtor under a facility has been drawn by the corporate debtor; (iii) financial statements showing that the debt has not been repaid; or (iv) an order of a court or tribunal that has adjudicated upon the 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he two registered valuers appointed under Regulation 27 shall submit to the interim resolution Professional or the resolution Professional, as the case may be, an estimate of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor; (b) if in the opinion of the interim resolution Professional or the resolution Professional, as the case may be, the two estimate are significantly different, he 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-regulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o cause an undue gain or undue loss to itself or any other person and comply with the requirements under section 29(2). Regulation.37. Resolution Plan:- 1. A resolution plan may provide for the measures required for implementing it, including but not limited to the following- (a) transfer of all or part of the assets of the corporate debtor to one or more persons; (b) sale of all or part of the assets whether subject to any security interest or not; (c) the substantial 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 necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutional documents of the corporate debtor, shareholder's agreement, joint venture agreement or other document of a similar nature, shall take effect notwithstanding that such consent has not been obtained. 7. No proceedings shall be initiated against the interim resolution Professional or the resolution Professional, as the case may be, for any actions of the corporate debtor, prior to the insolvency commencement date. 8. A person in charge of 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 Rs. 1532 crores (Rs.655 crores for steel and Rs. 877 crores for power) out of which the total debt is Rs. 1248 crores (Rs.531 crores for steel and Rs. 717 crores for power). The total Equity is Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Committee of Creditors may approve the Resolution Plan by voting not less than 75% of voting share of the Financial Creditors. The issue raised in the present CP is that the Resolution plan is not approved by the minimum 75% voting share of the Financial Creditors. The plan is approved by the Indian Bank,(lead Bank), JMF ARC Limited, Allahabad Bank, Andhra Bank and Oriental Bank of Commerce constituting 66.67% of 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 prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted, it is observed that the members did not have mandate to approve the Resolution Plan submitted by the Resolution Professional. Even, during the hearings held before the Adjudicating Authority on 03.11.2017 & 06.11.2017, the General Managers of all the three dissenting banks did not have any mandate to agree to the revised Resolution Plan and stated that still they have to obtain approval from their 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 abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount. Subsequently the Indian Bank has sent a e-mail on 25.10.2017 suggesting the company to file OTS proposal for Rs. 600 crores. As per the above advise, the Company has offered an OTS proposal of Rs. 600 crores vide their e-mail dated 26.10.2017. c. Even though the extended time of 270 days as per the IBC Code nearing on 07.11.2017 in the absence of the increased quantum of amount 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or at the time of classifying as NPA, recovery of the loans etc. However, even though majority of the Banks have agreed to go ahead with the OTS proposal, only 3 (three) dissenting Banks did not to support the proposal as the same is not in accordance with their own internal policy/the RBI guidelines. h. These three dissenting Banks also opined that the liquidation value will be more than the average of two of the registered valuers and the average amount works out to Rs. 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 Rs. 873.62 crores, which is more than Rs. 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 vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been guided by 75% as prescribed under Section 30(4) IBC rather than any policy of them or Reserve Bank guidelines in that regard. Section 30(4) of IBC merely states that Resolution plan may be approved by a vote not less than 75% of voting share of the Financial Creditors. It did not say whether such percentage is out of 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 vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulatory guidelines is higher of 20% of lenders sacrifice or 2% of restructure debt (which has to be brought upfront), contribution beyond this amount may be permitted to be infused within a period one year from the date of approval of the package. The Banking Regulation Act, 1949 has been promulgated. As per section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RBI from time to time, in order to find a solution for insolvency of a Company/Corporate Debtor within a stipulated time, falling which leads to Bankruptcy triggering the Company for liquidation. Ultimately, the Adjudicating Authority is also under legal mandate first to evolve a suitable solution to resolve insolvency 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 outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri D. Venkata Ramana, ZM(lndian Overseas Bank), Shri M. Prabhakara Reddy, AGM (Indian Bank), Shri Jayakar Rao, Manager (Oriental Bank of Commerce), Shri T. Aravind Kumar, Chief Manager (Andhra Bank), Ms. Y. Srilatha, CM (Law) (Andhra Bank), Shri D.S. Murthy, AGM (Allahabad Bank), Shri Sajan Joseph, 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment as well as State Governments is wooing investors internally and externally by offering several incentives in order to set up industries in the Country. When such is the policy of Government, is it justifiable to liquidate the Company involved herein, which is located in very remote rural 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 interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presented, has to be received. It is a simple, definite duty. The date and time of presentation and the name of the person who presented (with such other particulars as maybe prescribed) are to be endorsed truly and mechanically on the document presented. It is a ministerial function simpliciter. 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of implementation of IBC, if not we fear that the Preamble of the IBC will be lost/purpose for which the code was promulgated will not be achieved. Adjudicating Authority also had an opportunity to have a quick glance of the annual report of Central Bank of 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 Rs. 2378 crores in the financial year ended 31.03.2017 as compared to Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith "NPA details" to each staff for follow up and recovery on the move. From the above points, the importance attached to the resolution of NPAs/recovery of bad loans by the Banks is also seen. Three dissenting 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not expected to adjudicate on each of these issues. Though he submitted that RP has failed to consider the aspect of Intellectual Property Rights (IPR), it is worthwhile to add 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 Rs. 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n plan in accordance with law. Various options were considered during various CoC meetings and also revised the plan. Ultimately, the present resolution plan with OTS of Rs. 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 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavit dated 03.11.2017; (2) We hereby declared that the moratorium imposed on 10.02.2017 in this case ceased to have effect from the date of receipt 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 Rs. 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 Rs. 14.36 crores, out of which Rs. 0.13 crores is for other operational credito ..... X X X X Extracts X X X X X X X X Extracts X X X X
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