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TMI Blog2018 (9) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the resolution plan, which was accepted by the committee of creditors with the requisite voting share. 2. CA No. 114 of 2018 is being referred to as the first application CA No. 112 of 2018 as second application and CA No. 140 of 2018 as the third application, wherever required in this common order. 3. An application under Section 7 of the Insolvency & Bankruptcy Code, 2016 (for short to be referred here-in-after as the 'Code') bearing CP (IB) No. 42/Chd/Hry/2017 filed by the Corporation Bank against the corporate debtor M/s Amtek Auto Limited was admitted by this Tribunal on 24. 07. 2017 declaring the moratorium in terms of Section 14 (1) of the Code and the Interim Resolution Professional (IRP) was appointed on 27. 07. 2017, who was later on confirmed as the Resolution Professional by the Committee of Creditors (COC). The Applicant in the first and second application is the Resolution Professional. 4. The initial period of 180 days as provided in sub-section (1) of Section 12 of the Code for completion of the insolvency resolution process was expiring on 19. 01. 2018 and on the basis of decision of the COC, the period for completion of insolvency resolution process wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Private Limited, SBI Capital Markets Ltd. and IDBI Capital Markets & Securities Limited were appointed as the process advisors to assist the applicant in evaluating the Resolution Plans. The non-disclosure agreements were executed with potential investors and virtual data room (VDR) was created to make information about the corporate debtor available with the potential resolution applicants. The access for submission of Non Binding Offer (NBO) was provided to potential bidders and NBO received from six bidders, who were asked to submit NBO to the next phase as decided by the committee of creditors on 22. 11. 2017. 9. After the Code was amended by promulgation of Ordinance on 23. 11. 2017 in the provisions of the Code, providing eligibility criteria for various categories of persons by inserting Section 29A, the potential investors were asked to make the requisite disclosures and declarations about their eligibility to submit the Resolution Plan. The potential investors submitted the disclosures and access to data room was opened. In view of the amendment in Section 25 (2) (h) of the Code, the process of inviting Resolution Plans from potential resolution applicants was finalised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty House Group Pte Ltd. in the meeting dated April 2, 2018 and decided that the Resolution Professional seek the vote of the members of the CoC for approval of the said resolution plan in accordance with section 30 (4) of the Code read with regulation 39 (3) of the CIRP Regulations, 2016, by electronic voting. Further clarifications were received from LHG's legal counsel via email dated April 3, 2018 based on negotiation with CoC's legal counsel. Accordingly, this vote is conducted to approve the Resolution Plan submitted by Liberty House Group Pte Ltd. on March 26, 2018 along with the clarification mail received from LHG's counsel on April 3, 2018. " Copy of the list of the voting items circulated for voting is at Annexure A-6. 12. LHG made certain modifications in the resolution plan by email dated 03. 04. 2018 by way of addendum to the resolution plan. The plan was put to voting by electronic means from 04. 04. 2018 (2. 00 pm) to 05. 04. 2018 (1. 59 pm). 13. The plan was approved by the committee of creditors with 93. 89% of the voting share in favour of the plan. Three of the financial creditors namely Indian Overseas Bank, Oriental Bank of Commerce and Honda of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this Tribunal for approval of the plan on 16. 04. 2018, but a report appeared in The Economic Times newspaper on 17. 04. 2018 that the resolution professional in case ABG Shipyard Limited, a company undergoing corporate insolvency resolution process has declared Liberty House Group (LHG) ineligible under Section 29A of the Code. The said media report is at Annexure A-1. The perusal of the news item Annexure A-1 shows that LHG was the debtor of Expert Marketing Bank of India (EXIM Bank). 18. It is alleged in this application that EXIM Bank was also a member of the COC but had not raised an issue at any stage challenging the eligibility of the LHG. It rather voted in favour of the resolution plan. It is further stated that the Applicant without any further delay vide email dated 17. 04. 2018 sent at 7. 56 am requested the EXIM Bank to provide the necessary details on urgent basis. The resolution professional also sent email at 9. 18 am to LHG as to how, it was found ineligible under Section 29 A of the Code in the said case. Copy of the email is at Annexure A-3. EXIM Bank replied by email at 11. 10 a. m. on 17. 04. 2018 (Annexure A-4) that though there was no principal outstandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndums dated 05. 03. 2018 and 12. 03. 2018 issued by PwC did not raise any doubt about the eligibility of both LHG and DVI under Section 29A of the Code. Copy of the report of PWC is at Annexure A-9 (Colly). 23. It is thus prayed that since the issue of Liberty's apparent disqualification and ineligibility has cropped up when the CIRP period is coming to end on 20. 04. 2018, prayer has also been made to exclude the period from 06. 03. 2018 to 16. 04. 2018 from the period of completion of CIRP process. So, the aforesaid development is sought to be brought to the notice of the Adjudicating Authority for seeking suitable directions. One of the prayers made in the application is that if this Tribunal deems it appropriate, permit the resolution professional to decide on the eligibility of the resolution applicant in a time bound manner and to place its decision before the Adjudicating Authority and in the meanwhile to permit DVI to resubmit the resolution plan and hold negotiation with the resolution professional or the committee of creditors. 24. In reply to CA No. 112/2018, LHG the Resolution Applicant has averred that no adverse measures can be taken against it as a result of certai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in this email that classification of overdue interest payment was directly attributable to Exim Bank for not invoking the Expert Performance Bank Guarantees (EPBGs) knowing very well the genesis and fundamentals of the entire transaction. The classification of the accounts as NPA by Exim Bank and thereafter alleging ineligibility under Section 29A is simply an attempt to coerce the resolution applicant and / or companies to clear the alleged default amount. Even in the letter of Exim Bank, it has nowhere been stated that the accounts of these three companies were classified as NPA in accordance with the guidelines of Reserve Bank of India under the Banking Regulation Act, 1949. 28. It is, however, highlighted that without prejudice to the fact that LITL companies have disputed the dues, the same having been paid by the LITL companies to Exim Bank on 23. 04. 2018 and in this regard the Exim Bank has issued the no due certificate in respect of all the three companies separately as at Annexure R-2 (Colly). Therefore, in any case, there is no subsisting disqualification of the resolution applicant. 29. The resolution applicant, however, has also challenged the decision of ABG Ship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter has been issued to the resolution applicant by the resolution professional. At the end, it is submitted that the resolution professional has also filed CA No. 112 of 2018 for determination by this Tribunal about the eligibility of the resolution applicant to furnish the resolution plan and till the said application is adjudicated upon, the approval of the resolution plan may be kept in abeyance. 33. CA No. 140 of 2018 has been filed by DVI as applicant No. 1 and DVI PE (Mauritius) Limited as applicant No. 2. It is stated that applicant No. 2 is a company incorporated under the laws of the Republic of Mauritius as a private company and applicant No. 1 (DVI) is manager and holder of 100% management shares of applicant No. 2. 34. This application was filed on 23. 04. 2018 under Section 60 (5) (a) and (c) read with Section 31 of the Code. It is averred that the applicant submitted EOI as a prospective resolution applicant and participated in the process in good faith and with complete confidence as set out in the Information Memorandum and adhered to all the terms of the process memorandum including the timelines prescribed therein. 35. In the course of the process, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal affidavit by diary No. 1899, dated 30. 05. 2018 with regard to regulation 38 (3) of the Regulations, which makes it mandatory for the resolution applicant to provide details of all the connected persons which is necessary to enable the committee of creditors to assess the credibility of such applicant and other connected persons to take prudent decision while considering the resolution plan for its approval. In the declaration submitted in the instant case by the LHG, there was concealment of three companies namely LITL 6 Limited, LITL 7 Limited and LITL 18 Limited from the list of connected persons. 41. We have heard the learned counsel for resolution professional, learned senior counsel for resolution applicant, learned counsel representing the committee of creditors and also on the application filed by the DVI and have carefully perused the records. Written arguments have also been submitted. 42. The crucial issue requiring determination is about eligibility of LHG to submit the resolution plan. This is in relation to the outstanding dues of all the three connected entities of the Resolution Applicant namely; LITL 6, LITL 7 and LITL 18, who were granted the term loans res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o shall be the promoter or in management or control of the business of the corporate debtor during the implementation of the resolution plan; or (iii) The holding company, subsidiary company, associate company or related party of a person referred to in clauses (i) and (ii): 44. Sub clause (iii) of the Explanation would be relevant the term connected person includes holding company, subsidiary company, associated company or a related party of a person referred to in clauses (i) and (ii) of the Explanation. The learned counsel for DVI refers to the definition of term associate company as given in sub-section (6) of Section 2 of the Companies Act, 2013 as meaning a company in which the other company which is under consideration has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company. Explanation to this Section clarifies the expression significant influence as meaning control of at least twenty per cent of total share capital, or control of or participation in business decision under an agreement. 45. In view of the above, it was not much in dispute during the course of arguments that the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Limited case (supra), the Resolution Plans were received on 12. 02. 2018 i. e. after coming into force of the Amendment. 49. Despite all these submissions and discussion, we proceed to consider the effect of the aforesaid non-disclosure by the Resolution Applicant. 50. The Resolution Applicant has declared/disclosed the list of connected persons (i) who are promoters or in control of the Resolution Applicant; (ii) persons in the management of the company Resolution Applicant; (iii) the persons who will be promoters or in control of business of the corporate debtor during implementation of the plan; (iv) proposed management of the corporate debtor during the implementation of the plan; and the other information with regard to the list of holding companies, subsidiary companies etc. , as already observed. Effort has been made to provide the minute details of various such persons or associates. The non disclosures of the three entities i. e. LITL-6, LITL-7 and LITL-18 may be due to the large group of companies. 51. In order to put sanctity to the process of the resolution, the Resolution Professional sought the report from one of the big four internationally known PwC to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or connected person of the Corporate Debtor in default, except the three entities being financial debtors qua Exim Bank. Admittedly Exim Bank participated in the meetings of the COC and remained associated with the resolution plan. Exim Bank never pointed out to the COC that the connected persons of resolution applicant defaulted for any amount to make them ineligible and had this fact been brought to the notice by Exim Bank to the COC, the Resolution Applicant could be asked to pay the amount within the permissible period. The plan was approved by the CoC in the first week of April, 2018 and the permissible period of 270 days to complete the resolution process was expiring on 20. 04. 2018 and still there was about 15 days time left. 54. In reply to the email sent by Resolution Professional to the Exim Bank, it is stated by the Exim Bank in the email Annexure A-4 dated 17. 04. 2018 attached with CA No. 112 of 2018 that there was an amount of USD 2, 793, 859. 96 as on 31. 03. 2018 due to Exim Bank from the aforesaid three entities and that the accounts of these concerns were declared NPA on particular dates, which fall more than one year before the resolution plan was submitted. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Scheme accepted by the requisite majority of the financial creditors constituting Committee of Creditors. 58. Learned counsel for DVI referred to the judgment of Hon'ble Supreme Court in "Devendra Kumar Versus State of Uttaranchal and Others" (2013) 9 Supreme Court Cases 363 wherein the Hon'ble Supreme Court held that if the information sought for by the employer is not disclosed would amount to suppression of material information and in that event, the service was liable to be terminated. That was a case of challenge to the termination of services of the appellant who was appointed as a constable in the police department. The applicant before the Hon'ble Supreme Court was asked to submit an affidavit giving certain information particularly whether he had ever been involved in a criminal case. He gave the affidavit stating that he has never been involved in any criminal case. Pursuant to the verification of antecedents, it was found that he was in fact involved in a criminal case, though it was ultimately contended that the FIR was cancelled. The Hon'ble Supreme Court held that the criminal case against a person might not involve moral turpitude but suppressing of this informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .18 crores towards interest as compared to the amount offered in the plan submitted by the Resolution Applicant. 64. The learned counsel for the parties submitted that the total amount of debt in respect of the Corporate Debtor was Rs.12, 603 crores and the liquidation value of its assets has been determined at Rs.4, 119 crores. In the resolution plan approved by the COC, the Resolution Applicant offered affront consideration (cash) for financial creditors and interim resolution professional costs to the tune of Rs.3225 crores and fresh infusion for stabilizing and improving operations to the tune of Rs.500 crores and the total resolution amount is Rs.4, 025 crores. The total potential recovery by the Financial Creditors has been calculated at Rs.4, 404 crores. 65. Admittedly DVI was quite short of the proposals of the Resolution Applicant and on the basis of the evaluation matrix as held in the meeting of the COC on 06. 03. 2018, the Resolution Applicant was considered as the preferred bidder. In view of the above, DVI withdrew its bid and it also withdrew the minimum amount, which was deposited for being eligible to submit the resolution plan. 66. The final resolution plan was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement of the Code and the Regulations; and (b) the resolution plan has been approved by the committee. 71. The Resolution Professional has given the necessary certificate, which is at Annexure A-10 with CA No. 114 of 2018. It is certified that the resolution plan meets the requirements of the Code and Regulations and that the plan has been duly approved by the COC with 94. 20% of the voting share in favour of the resolution plan. It is further certified that the resolution plan provides for insolvency resolution process costs being paid in priority to any other creditors of the Corporate Debtor in the manner set forth in paragraph 4 of Part IV (Financial Proposal of the Resolution Applicant) and Schedule 4 (Implementation Provisions) of the Resolution Plan. It is further certified that the liquidation value outstanding to Operational Creditors is NIL and accordingly no payment under Regulation 38 (1) (b) of the CIRP Regulations is required or contemplated under the resolution plan. However, to protect the interest of the stake holders, the Resolution Applicant has proposed certain payments to be made to all the Operational Creditors in the manner set forth in paragraph 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian, shall be appointed as the Insolvency Professional of the Corporate Debtor in order to supervise, manage and control all the business and operations of the Corporate Debtor from the date of approval of the resolution plan till closing date in accordance with the terms of the resolution plan. 79. One of the contention raised by the learned senior counsel for ICICI Bank in CA No. 77 of 2018 that the applicant Bank was forced to give assent to the resolution plan otherwise assent would have lead to the nil payment to the applicant bank in case of approval of the plan. This contention cannot be accepted as there are as many as 95 financial creditors being members of the COC and the voting share of ICICI Bank is only 1. 108%. The claim made by ICICI Bank was Rs.166. 66 crores whereas the Resolution Professional accepted the claim to the tune of Rs.139. 66 crores. So, even acceptance of the rest of the amount of claim to the tune of Rs.27 crores would not bring any change in the voting pattern, the total amount of financial debt being Rs.12, 604. 60 crores as is evident from the document Annexure A-8 attached with CA No. 114 of 2018. The resolution professional has also filed the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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