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TMI Blog2018 (8) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... By this common order, we propose to dispose of all the four applications filed under sub-section 5 of section 60 of the Insolvency and Bankruptcy Code, 2016. CA(IB)No.402/KB/2018 2. This is an application filed by the Financial Creditor namely State Bank of India for initiating Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short, I&B Code) read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (in short, the Rules) against Corporate Debtor/Orissa Manganese & Minerals Ltd. (OMML). 3. Vide Order dated 3rd August 2017, the application was admitted and Shri Sumit Binani was appointed as the Interim Resolution Professional (IRP). Upon admission CIRP was initiated with effect from 3rd August 2017. The appointment of IRP was confirmed by the Committee of Creditors in their meeting held on 4th September 2017. The Resolution Professional continued the process inviting application by issuing advertisements as per provisions of the Code and Regulation. However, the initial period of CIRP of 180 days has been expired on 29th January 2018. In the meanwhile, at the request of the CoC, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from respective applicants namely GMSPL, EARC and Srei Infrastructure Finance Limited (SIFL). Those resolution plans were considered by the CoC in its 11th meeting held on 13th April 2018 and after evaluation and scoring of the resolution plans, the CoC ranked the resolution plan submitted by one resolution applicant namely GMSPL as H1 bidder. 7. Negotiation has been undertaken with the GMSPL, resolution applicant and upon several rounds of negotiations, the shortlisted resolution plan of the GMSPL has been considered by the CoC for its approval. In the 12th meeting held on 21st April 2018, the CoC unanimously taken a decision to convene a meeting of the Committee of Creditors on 25th April 2018 at around 6 P.M for voting on the Resolution Plan proposed by GMSPL. In continuation of the decision taken in the 12th CoC meeting held on 25th April 2018, the CoC being satisfied with the Resolution Plan submitted by GMSPL and it meets all the requirements under sub-section (2) of Section 30 of the Code was placed before the Members of the CoC for voting and that plan was approved by more than 89.23% of voting share of financial creditors of the corporate debtor. 8. Ld. Resolution Profes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Memorandum. 11. The Resolution Professional has failed in its duty of disclosing of the required information in the Information Memorandum in terms of the Code and has wilfully concealed material liabilities from the Resolution Applicant despite full knowledge. The Resolution Plan of the Applicant is higher in offer and the Applicant should have been declared as H1. The Applicant has offered Rs. 350 crores in its Resolution Plan. On the other hand, GMSPL has offered a total sum of Rs. 313.79 crore. This scoring for classification of Resolution Applicant's rank has been done by the Resolution professional without considering the experience of the Resolution Applicant and thereby failed in qualitative assessment in recording the classification of the ranking of the Resolution Applicant and thereby exercised the discretion in an arbitrary manner and declared GMSPL as H1 is quite improper and illegal. The Resolution Professional allowed the liquidation value of Corporate Debtor to be reduced to bridge the gap between the Resolution Plan of GMSPL and liquidation value of Corporate Debtor determined by experts. The liquidation value is prepared by independent experts pursuant to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Edelweiss by the COC confirming that the waiver of uncrystallized mining liabilities by NCLT would not be a condition precedent. It was however noted that enterprise value attributable to equity state is arrived by calculating the 24% proportion of all cash value offered by Edelweiss in their Resolution Plan. It was not acceptable to COC who decided that the enterprise value of the equity stake should be paid as upfront cash which was not agreed to by Edelweiss. 14. Thereafter, H2 bidder's proposal was taken but was also unacceptable to the members. It was decided by 97.62% of the COC to restart a fresh process and seek invitation only from those entities who had earlier submitted expression of interest pursuant to an advertisement dated 21st September, 2017. The last date for submission of resolution plan was 10th April, 2018 which was known to Edelweiss. In the second round of bidding, in meeting dated 13th April, 2018, Edelweiss was scored as last and was declared H3 and Ghanshyam Mishra & Sons (P.) Ltd. as H1 on a basis of fair and transparent scoring. As soon as the meeting was over, the Representative from the Professional Advisors to RP received a telephonic call from a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fessional, its claim on the strength of pledge of shares invoked by the applicants violated the Regulation 13 and Regulation 14 of the CIRP Regulations 2016. Upon the said contentions, the applicant prays for rejection of the Resolution Plan. In the alternative, prays for issuing direction to the Resolution Applicant to undertake to pay the full amount due and payable under deed of corporate guarantee and to issue direction protecting the rights of the lenders of Adhunik Power and Natural Resources (APNRL) as pledgee. 17. The Resolution Professional contends that none of the prayers sought for by the applicant is liable to be allowed. Ld. Counsel appearing for the Resolution Professional submits that the applicant is also a resolution applicant who is ranked as H3 bidder and its attempt is to drag the CIRP only with an attempt to prevent CIRP from succeeding. According to him, what the applicant intending is to see that the Resolution Plan submitted to the Adjudicating Authority vide CA(IB) No.402/KB/2018 could not be approved and the Corporate Debtor may be gone into liquidation. He further contends that both the claim of the applicant is not sustainable under law and this applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conducting the CIRP process in accordance with the provisions of the Code and Regulation and thereby the Resolution Plan is liable to be rejected. 21. The Resolution Professional filed reply affidavit denying all the allegations levelled against him and contends that despite communication given to the applicant for submission of its claim with supporting documents, the applicant failed in giving response so as to verify the applicant's claim and thereby unable to admit the claim of the applicant and produced supporting proof to prove that repeated communications have been sent to the applicant requesting the applicant to furnish the details of the claim. He further submits that none of the Code or Regulations is violated by him nor there is any disobedience of the direction of the Hon'ble Supreme Court nor directions of the Hon'ble Jharkhand High Court is violated. The Resolution Professional, upon the said contentions prays for dismissing the application with exemplary cost. 22. Heard the Ld. Resolution Professional, his counsel and Ld. Counsel for the applicants in all the above refereed applications. Perused the records and the citations referred to by the Ld. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es under the jurisdiction of the group are one of the oldest and best proven reserves in India. These mines were leased out to the chief patron of the group, late Shri. Ghanashyam Misra in the year 1970. It claims that it is actively in operation and it has a capacity to deliver about 1.5 MTPA of High Grade Iron Ore. It is this group is the applicant in the case in hand. The above said claim of the applicant is not at all under challenge from any corner. Thus, the resolution applicant is a well experienced and competent bidder in doing the very same business of the corporate debtor. In the said back ground let us take the objections raised by the EARC, an unsuccessful bidder. EARC filed two applications challenging the approval of resolution plan of GMSPL by the CoC. 26. Raising various contentions EARC challenged the selection process of Resolution Applicants as well as approval of the Resolution plan of GMSPL by the CoC. Let us take the first and main objection in respect of the selection process for ranking of resolution applicants. The objection is that non-ranking of the Applicant as H1 bidder is in violation of the provision of the Code/Regulations and as well as against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s significant to note here that the applicant herein not disputed the evaluation matrix. In order to have a comparison of the offers of all the three applicants it is good to have a look at the comparative chart and scoring summary of three Resolution Plans produced by the resolution professional in this case. The comparative chart and scoring summary produced along with the supplementary affidavit filed by the Resolution professional is shown as below:- Payment plan of Ghanshyam Misra Payment plan of SREI Payment plan of Edelweiss ARC Total payment to all Creditors. Workmen and employees & CIRP cost 321.19 300.00 282.00 Payment estimated for CIRP costs 3.41 3.41 3.41 Payment for workmen & employees 0.38 0.38 0.38 Payment to critical Operational Creditors 7.40 0.74 Payment to Financial Creditors 310.00 295.47 166.21 -Of which Upfront payment (within 90 days) 250.00 50.00 166.21 -Of which NPV of balance payments 40.83 250.00 - -Total of Upfront payment and NPV 290.83 300.00 166.21 -Actual payment terms of balance payments Compulsorily Redeemable Preference Shares of Rs. 60 crores redeemable at the end of 5th year from NCLT appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Resolution Professional is to be held illegal as the Resolution Professional was absent in the meeting. The last and final meeting of the CoC was held on 25/04/2018 in Kolkata. Truly, on that date the Resolution Professional was not present in meeting in person. On the other hand his advisers were present in the CoC meeting and they lead the meeting under the guidance and advice from the RP who was in Mumbai. RP gave guidance through audio call through out the meeting. Thus the question is whether the absence of RP in the meeting held on 25.04.2018 amount to violation of any of the provisions of the Code or Regulation so as to nullify the meeting. 33. Let us see the provisions of the Code which dealt with the mode conducting meeting by an RP. Section 24. Meeting of committee of creditors (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 B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheduled. He also submits that he did not request the CoC for postponement for want of time to complete the period which would expire on 29th April 2018. Since the CIRP is expiring in the instant case on 29/04/2018 he decided to continue with the CoC meeting as scheduled with the approval of the CoC and CoC successfully convened the meeting under his guidance and advice over phone. According to him none of the provisions of the Code or Regulations make him compulsory to attend in person in all the meeting and that expect in the said meeting he was present in all the meeting and there is substantial compliance of the provisions of the Code and Regulation. 36. We are now in a digital world. The term video audio conferencing has become prevalent conference tools in the global business world today. Keeping in pace with the new technology, IBBI has made certain regulations permitting the RP to conduct Meetings of creditors through video conferencing or other audio and visual means. So also the Central Government under the Companies Act, 2013, has made certain rules to be observed for conducting of Board Meetings through Video Conferencing and other audio visual means under Sections 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide for provision of Corporate Debtor as a going concern, but provision is provided for slump sale without continuation of the Corporate Debtor. According to the Ld. Senior Counsel, the Resolution Plan of GMSPL is based on and/or is in the nature of slump sale and the Corporate Debtor is left with no such business operations or affairs which could be considered as a going concern. Therefore, the Resolution Plan submitted for approval is in violation of the provisions of the Code. He further would submit that Regulation 38 Section (5)26 of the Code are not at all complied in the case in hand. 40. The above said submission seems to have devoid of any merits, the resolution applicant truly proposed certain structural arrangements in regard to the operation of the mining units of the Corporate debtor. The proposal has been deliberated by the Committee of Creditors. The proposal of the H1 Resolution Applicant placed before the Committee of Creditors are the following: The Resolution Applicant has subsequently proposed the following final structure which has also been circulated to all the members of the CoC: Step 1-:Demerger of OMML into: 2. Mining Company : Retains INR 172 Cro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition of shares of the corporate debtor, or the merger or consolidation of the corporate debtor with one or more persons; 10. Satisfaction or modification of any security interest; 11. Curing or waiving of any breach of the terms of any debt due from the corporate debtor; 12. Reduction in the amount payable to the creditors; 13. Extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor; 14. Amendment of the constitutional documents of the corporate debtor; 15. Issuance of securities of the corporate debtor, for cash, property, securities or in exchange for claims or interest, or other appropriate purpose; and 16. Obtaining necessary approvals from the Central and State Governments and other authorities. 43. On going through the reorganization of business dealt with in the Resolution Plan under Section 'C' we do not find any reason to hold that the terms of re-organisation violate any of the provisions of the Code or Regulation 37(1). The transfer of one unit come under the purview of re-organisation of business set out by the resolution applicant cannot be styled as closure of a unit. Therefore, the said conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onse till February 21st, 2018. Despite repeated request made by the resolution professional as evident from the copy of e-mail dated January 08, 2018, January 13, 2018, the applicant did not respond to the query addressed to it by the resolution professional. On the other hand, on 21st February 2018 vide Annexure-A to the Reply Affidavit submitted by the Resolution Professional, the applicant submitted to the resolution professional that the corporate guarantee has not been invoked. Thus, the question is whether an uninvoked corporate guarantee can be considered as matured claim of the applicant herein. 48. In view of the application of Moratorium under Section 14 of the Code, the applicant is prevented from invoking the corporate guarantee while the moratorium is in force. In the case in hand, the OMML's guarantee has not been invoked by the EARC (applicant) till date of completion of CIRP process and the applicant could not invoke corporate guarantee when the moratorium is in force. That being the legal effect of the uninvoked corporate guarantee, we find no illegality or irregularity in not admitting the claim for reasons for non-invocation of the deed of corporate guarantee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued direction to the Resolution Professional in that case which cannot be a proposition to be applicable in the case in hand. An interim direction issued not in the case in hand cannot be considered as a proposition binding on the resolution professional. In the above said view we do not find any force in the argument advanced on the side of the applicant in regards non-admission of the claim of the applicant. 53. Coming to the second objection that the shares owned by the corporate debtor in APNRL which was pledged with IIFCL to secure the loan given by IIFCL to APNRL which has been assigned to the applicant being invoked on 30th April, 2018 its claims on the basis of pledge also would have been considered by the Resolution Professional is also found devoid of any merit. It is submitted by the Resolution Professional that on 30th April 2018 the Moratorium is in force and, therefore, pledge of shares cannot be invoked during the moratorium period imposed under Section 14 of the Code. Invocation of pledge issued by the applicant on 30th April 2018 is non-permissible under law and, therefore, the resolution professional is not bound to admit the said claim, argued by the ld. Resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation forthcoming as to why the applicant not approached the Adjudicating Authority immediately after the non-admission of its claim by the resolution professional. So also invocation of pledge on 30.04.2018 by the applicant is bad in law. 57. It appears to us that it is a deliberate attempt to stage mange an objection against the approval of a resolution plan other than the plan submitted by the resolution applicant. We also found that CA 398 of 2018 filed for rejection of the resolution plan is liable to be dismissed since the very same applicant not at all succeeds in proving its contention and that the applicant approaches the Bench without any clean hand. Instances of challenging resolution plan by unsuccessful resolution applicant is at the increase. Filing like petition is also one among the reason for the delay in approving the resolution plan passed by the CoC in compliance of the provisions of the Code. This is a unique case in which the applicant herein filed the application without any valid grounds. Dismissing like petition without cost may encourage the applicant like the applicant to file like petition. It would also amount to allowing the applicant to abuse t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018 (Annexure R.2) Annexure R.4 dated 27.03.2018 and Annexure R.3 dated 29.03.2018 Annexure R.5 dated 09.04.2018. 61. This is a case in which Corporate Insolvency Resolution Process was expired on 29th April, 2018. It is significant to note here that on 31.03.2018 the applicant has sent a letter to the Resolution Professional (Annexure-5) enquiring him as to which Form is required for submission of claim. So also in the said letter a contention has raised as to his right to claim the amount as per Section 25(2) of the MMDR Act. To this letter also, the Resolution Professional has sent a reply (Annexure R.6) dated 06.04.2018. Despite the receipt of the reply to that letter also there was no further communication from the applicant and the applicant rushed before this adjudicating authority by filing the application on 06.06.2018, that too at the fag end of the hearing of application filed for approval of Resolution Plan submitted before the Adjudicating Authority. The contentions regarding the non-receipt of the communication and that the applicant was not called for submission of its claim are therefore found not true but false. 62. The next contention on the side of the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no such case that under Section 25(2) of the MMDR Act any certificate has been issued for realisation of the amount due. So the said contention is also found devoid of any merit. 65. The next contention is that applicant being considered as an operational creditor, then the operational creditor is entitled to participate in the proceedings of CIRP initiated by the resolution professional in view of Section 24 of the Code. According to the Ld. Counsel for the applicant, the claim of applicant constitutes more than 10% of the entire claim and hence deserved to be invited for attending the CoC meeting. Admittedly, the claim of the applicant to the tune of Rs. 760.57 crores is a disputed claim pending for consideration before the Hon'ble Jharkhand High Court. So, the remaining amount of claim comes to the tune of Rs. 93,51,91.724.00/- crore. Even if the applicant's undisputed claim if admitted that amount does not come within the purview of 10% of the entire claim. Moreover, for want of production of substantive documents to prove the demand of the applicant, the Resolution Professional did not admit any portion of the claim of the applicant and thereby non-issuing notice under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resolution of the Corporate Debtor's assets. Deliberate negligence, lapses on the other hand brought to the notice of the Bench from the side of the applicant in not responding to the communication addressed to the applicant by the Resolution Professional. Moreover, the applicant approached this adjudicating authority at a belated stage without showing any valid reason. The reason advanced that the applicant came to know about the application filed by the Resolution Professional for approval of the Resolution Plan from the media report is found not true but false. In view of the above said discussion this is a fit case which can be dismissed with exemplary cost as prayed for by the RP. Filing of application like the application is at the increase. Like applicant whoever may by cannot be encouraged. So we dismissed the application with a cost of Rs. 1,00,000/- which can be realised form the defaulting applicant i.e from the District Mining Officer who filed the application. This point is answered accordingly. Point No.3: 69. The above said discussions leads to a legitimate conclusion that the Ld. RP has done his work and duties with utmost care and sincerity with out giving any ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proposed plan provides provisions to see that the business of the corporate debtor and SPV shall continue on a going concern basis and the operation of the company will be continued in the normal course of business upon implementation of the proposed plan. Provisions for payment of dues due to the workmen within 30 days of approval and discharging the resolution cost are certain highlights brought to our notice on the side of the resolution professional. The resolution professional being succeeds in showing us that all the requirements to be meted out is complied, we have no other option other than to approve the resolution plan. Accordingly, we approve it upon the following orders:- 73. Before concluding it is just and fare to note certain serious allegations levelled against the applicant in CA(IB) 398/KB/2018 in regard to production of a copy of unapproved Resolution Plan of the H1 Resolution Applicant (GMSPL) along with its application. An application with the copy of the Resolution Plan of GMSPL has been annexed with the application. No explanation was forthcoming from where the applicant has got a copy of the Resolution Plan which has not been approved by the CoC. The GMS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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