TMI Blog2019 (4) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... e no locus standi as far as approval of the Resolution Plan by the CoC is concerned. They are not eligible to attend and vote at the meetings of CoC if they are holding less than 10% of the total debt - Section 24(3)(C) of IBC dispel the misconceptions of the Operational Creditors/intervener that they have edge over the other beneficiaries. Resolution Plan as approved by the Committee of Creditors “CoC” meets the requirements as referred to under section 30(2) of the Insolvency and Bankruptcy Code, 2016 and therefore, IA 224 of 2018 is liable to be allowed as prayed for - Resolution Plan dated 26.05.2018 along with Addendum dated 05.06.2018 submitted by the RP with approval of the CoC is approved. - IA NOS. 224, 271, 272, 273 AND 337 OF 2018 CP(IB) NO. 88/9/NCLT/AHD/2017 - - - Dated:- 27-2-2019 - MR HARIHAR PRAKASH CHATURVEDI MEMBER (JUDICIAL) AND MS. MANORAMA KUMARI, MEMBER (JUDICIAL) For The Applicant : Mr Harmish K. Shah, Rajesh Parikh, Anip Gandhi and Raju Kothari, Advs. For The Respondent : Mr Mihir Thakar, Salil Thakar, CoC and Ms. Natasha D. Shah ORDER PER : MS. MANORAMA KUMARI, MEMBER (JUDICIAL) The IA 224 of 2018 is filed under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inviting claims from all the creditors, IRP/RP received claims, hence CoC was constituted on 10.10.2017. 8. It is further submitted that in compliance of the resolution passed in the second meeting of the CoC, a public announcement was made in the newspapers inviting the expression of interest (hereinafter called EoI ) fixing the last date as 07.02.2018. On the said date, the applicant received the resolution plan from one Kushal Limited (hereinafter referred to as Resolution Applicant ), but the said plan was rejected by the CoC in their fourth meeting dated 17.02.2018, as the plan was devoid of minimum eligibility criteria with respect to the Earnest Money Deposit (hereinafter referred to as EMD ). Consequent upon which, CoC further resolved to invite fresh EoI and the Resolution Applicant was also directed to do the needful. 9. Meanwhile, CoC resolved to get 90 days extension of CIRP beyond 180 days and vide order dated 19.03.2018, CIRP was further extended by 90 days by this Bench. 10. It is stated that on issuance of fresh EoI vide advertisement dated 21.02.2018, the RP received a resolution plan on 19.03.2018 from the same Resolution Applicant, though EoI were rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported the argument advanced by the Ld. Counsel of the RP. No representation received from the suspended management. 17. That during the pendency and/or on filing of the application by RP under section 33(6) of the Code, number of intervention applications are filed. Some of the intervention applications are being withdrawn in due course, however, some of the applications are decided and disposed of on merit by hearing RP and the CoC. The order of those intervention applications are passed separately for the sake of convenience, as those are not maintainable. 18. Heard the arguments of the RP and CoC and also seen the Resolution Plan filed with the application. 19. That on perusal of the application as well as the Resolution Plan as also discussed above, which are not narrated here in again for the sake of brevity. 20. In the second meeting, CoC passed resolution and invited EoI which was published on 13.01.2018 with following criterion: (i) That the net worth/market capitalization of the Resolution Applicant as the date of submission of the EOI shall be ₹ 1000 Crores or more' (ii) That the Resolution Applicant shall have business experience in the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm for further 90 days. 23. On perusal of the record and the advertisement, EoI was received from three parties viz. (i) Kushal Limited jointly with Mr. Sandip Agrawal (ii) Shree Rama Newsprint Ltd jointly with Ridhi sidhi Glucoboils Limited and (iii) Poddar International Limited jointly with three other applicants. But out of three parties, the resolution plan came from only Kushal Limited joining with Mr. Sandip Agrawal. 24. In the fifth meeting of CoC, proposal of the Kushal Limited jointly with Mr. Sandip Agrawal was discussed. The CoC suggested the Resolution applicant to improve the offer. Accordingly, Resolution Applicant submitted the revised resolution plan on 31.03.2018 and finally in the 8th meeting convened on 04.06.2018, the CoC planned for e-voting which commenced on 06.06.2018 and terminated on 07.06.2018 and the plan dated 26.05.2018 of Kushal Limited jointly with Mr. Sandip Agrawal was approved by 72.79% voting along with the Scheme of Amalgamation forming part of the resolution and addendum. 25. On perusal of the resolution plan, it is/was found that applicant made all the compliances in conformity with the provisions of the Code and the regulations frame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law time being in force. Certificate of Resolution Professional F Confirms to such other requirements as may be specified by the Board NA 2 Reg 38 (1) A resolution plan shall identify specific sources of funds that will be used to pay the - Sources of funds detail has been provided by the Resolution Applicant(s) ( a ) Insolvency resolution process costs and provide that the insolvency resolution process costs will be paid in priority to any other creditor 147 170 ( b ) Liquidation value due to operational creditors and provide for such payment in priority to any financial creditor which shall in any event be made before the expiry of thirty days after the approval of a resolution plan by the AA NA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional u/s 29A. 26. It is found that RP/the applicant is duly authorized to submit the approved resolution plan before this Bench for approval in accordance with the provisions of the Code. Though resolution plan was approved by CoC by 72.79% of voting, however, in view of the amendment in Section 30 of the Code, 2018 which came into force on 06.06.2018, revised resolution plan ought to have been approved by the minimum of 66% of voting share of Financial Creditors, but in the instant case, resolution plan was duly approved by majority of 72.79% of the members of CoC. The Hon'ble Supreme Court in its recent judgment in Civil Appeal No. 10673 of 2018 in K. Sashidhar v. Indian Overseas Bank Comprising of Hon'ble Justice A.M. Khanwilkar and Hon'ble Justice Ajay Rastogi observed that: 33. As aforesaid, upon receipt of a rejected resolution plan the adjudicating authority (NCLT) is not expected to do anything more; but is obligated to initiate liquidation process under section 33(1) of the I B Code. The Legislature has not endowed the adjudicating authority (NCLT) with the jurisdiction or authority to analyze or evaluate the commercial decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional creditors in prescribed manner, (iii) the management of the affairs of the corporate debtor, (iv) the implementation and supervision of the resolution plan, (v) does not contravene any of the provisions of the law for the time being in force, (vi) conforms to such other requirements as may be specified by the Board. The Board referred to is established under section 188 of the I B Code. The powers and functions of the Board, directly or indirectly, pertain to regulating the manner in which the financial creditors ought to or ought not to exercise their commercial wisdom during the voting on the resolution plan under section 30(4) of the I B Code. The subjective satisfaction of the financial creditors at the time of voting is bound to be a mixed baggage of variety of factors. To wit, the feasibility and viability of the proposed resolution plan and including their perceptions about the general capability of the resolution applicant to translate the projected plan into a reality. The resolution applicant may have given projections backed by normative data but still in the opinion of the dissenting financial creditors, it would not be free from being speculative. These aspects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any explanation. It is stated by the applicant that as per the resolution plan, applicant, the operational creditor will get cash payment of the 10% of the total outstanding amount in five equal installments from the 3rd to 7th year after the effective date. It is also stated by the applicant that apart from 10% of the outstanding amount, the Resolution Plan provides for issue of share warrant with an option to purchase the shares by paying 75% of the offer price within the next 18 months at their sole discretion. The initial subscription towards share warrant, which is 25%, is a credit given by the Resolution Applicant to the applicant, the operational creditor. However, this provision is not compulsive and the applicants, the operational creditors are not compelled to take the shares. It is submitted by the applicant, the operational creditor, that by this arrangement, the operational creditor will lose 65% of the amount, if the applicant subscribes the shares. 28.3 IA 273 of 2018 - Tourism Finance Corporation of India Ltd It is stated that the applicant is a company within the meaning of Companies Act, 2013 and a notified Public Financial Institution within the meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash payment of the 10% of the total outstanding amount in five equal installments from the 3rd to 7th year after the effective date. It is also stated by the applicant that apart from 10% of the outstanding amount, the Resolution Plan provides for issue of share warrant with an option to purchase the shares by paying 75% of the offer price within the next 18 months at their sole discretion. The initial subscription towards share warrant, which is 25%, is a credit given by the Resolution Applicant to the applicant, the operational creditor. However, this provision is not compulsive and the applicants, the operational creditors are not compelled to take the shares. It is submitted by the applicant, the operational creditor, that by this arrangement, the operational creditor will lose 65% of the amount, if the applicant subscribes the shares. P-01 of 2019 - Sales Tax Officer, Kadi Dist. Mehsana, Gujarat 29. This P-01 of 2019 has been filed by the Sales Tax Officer (1), Office of the Assistant Commissioner of State Tax, Unit-33, Kadi, Dist. Mehsana, State of Gujarat, for a demand of ₹ 47,35,72,314/- towards Value Added Tax/Central Sales Tax due from the Corporate Debtor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of the law being in force, being Gujarat Value Added Tax, 2003 and Central Sales Tax Act, 1956 by waiving off the dues of the Gujarat Value Added Tax and Central Sales Tax as payable to the Applicant as suo moto. 29.5 The applicant admittedly filed this application before this Bench on 19.12.2018 and on perusal of the records, it is observed that the applicant has approached the RP on 22.10.2018, whereas the Resolution Plan dated 26.05.2018 along with Addendum dated 05.06.2018 was approved by the CoC with voting majority of 72.79 per cent in favor of the said Resolution Plan. Thus, the claim was made by the applicant at a much belated stage not only before the RP but also before this Bench too. Since CIRP is a time bound process, this application cannot be entertained due to delay and latches. The applicant should have submitted his claim when the RP invited the claims through public announcement on initiating the Insolvency Resolution Process. However, on perusal of the Resolution Plan, it is found that Resolution Applicant has taken care of all the operational creditors as per provisions of Section 53 of the Code which deals with distribution of assets and approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 and filed this Interlocutory Application with this Tribunal on 24.07.2018 after a lapse of 9 months for the reasons best known to the applicant. 30.3 With respect to the averments made in paragraph 4(viii), the respondent, the Resolution Professional denies that during the course of meeting of CoC held on 04.06.2018, it was casually informed to the applicant by the Resolution Professional that the claim of the applicant is proposed to be categorized as Unsecured Financial Creditor and further denies that despite several protests and objections raised by the applicant, an addendum dated 05.06.2018 to the Resolution Plan was obtained from the Resolution Applicant and the same was approved by CoC. It is stated by the Resolution Professional that on the contrary, the Resolution Professional addressed an email dated 30.05.2018 requesting the applicant to substantiate its claim whether the same falls under the category of secured creditors and if so, the security involved. However, the applicant failed to substantiate its claim as secured creditor as contemplated under the Insolvency and Bankruptcy Code, 2016 and the regulations for the time being in force. With respect to the av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores. Therefore, the applicants shall not be entitled for any stake from the proceeds of the liquidation of estate of the Corporate Debtor. The percentage wise stake of all the stakeholders is presented in a tabular form: S. No. Type of Stakeholder/Creditor Total claim of Stakeholder (Rs. In crores) % age of Stakeholder in total claim 1 Secured Financial Creditors 1437.11 88.85 2 Unsecured Financial Creditors 40.89 2.53 3 Operational Creditors including Statutory Dues 139.40 8.55 Total: 1617.40 100.00 31.3 It is submitted that the application(s) are not maintainable and the objections against the Resolution Plan are nothing but to stall the resolution plan/process despite being offered 10% (along with 25% share warrant) though the debt which is owed to the applicants in aggregate is not forming more tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be required to pay the balance subscription amount of ₹ 13.80 crores i.e. 3X (three times) of Initial subscription amount out of the total amount of Share Warrants, on payment of which the Share Warrants will be converted into Equity Shares by allotment. 4. If the Unsecured Financial Creditor do not exercise the option to convert Share Warrants into Equity Shares, the initial amount of 25% as adjusted or appropriated shall stand forfeited in accordance with Regulation 77(4) of the Chapter VII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. Notwithstanding such forfeiture, the liability of the resolution Applicant/Corporate Debtor against the unsecured Financial Creditor would stand discharged in full pursuant to this Resolution Plan. 5. The time period allowed for exercising the option for conversion of Share Warrants into Equity Shares shall be 18 months from the date of allotment of warrants as per Chapter II of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009. 6. The shares issued pursuant to conversion of warrants would be subject to lock-in and other conditions as per Chapter VII of SEBI (Issue of Capital and D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of the Consolidated Fund of India and the Consolidated Fund of a State, if any, in respect of the whole or any part of the period of two years preceding the liquidation commencement date; (ii) Debts owed to a secured creditor for any amount unpaid following the enforcement of security interest; (f) Any remaining debts and dues; (g) Preference shareholders, if any; and (h) Equity shareholders or partners, as the case may be. (2) Any contractual arrangement between recipients under sub-section (1) with equal ranking, if disrupting the order of priority under that sub-section shall be disregarded by the liquidator. (3) The fees payable to the liquidator shall be deducted proportionately from the proceeds payable to each class of recipients under sub-section (1), and the proceeds to the relevant recipients shall be distributed after such deduction. Explanation - For the purpose of this section - (a) It is hereby clarified that at each stage of the distribution of proceeds in respect of a class of recipients that rank equally, each of the debts will either be paid in full, or will be paid in equal proportion within the same class of recipients, if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent] of other debts of the corporate debtor; (b) provides for the 3[payment] 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 resolution plan; (e) does not contravene any of the provisions of the law for the time being in force; (f) conforms to such other requirements as may be specified by the Board. 4[Explanation - For the purposes of clause (e), if any approval of shareholders is required under the Companies Act, 2013(18 of 2013) or any other law for the time being in force for the implementation of actions under the resolution plan, such approval shall be deemed to have been given and it shall not be a contravention of that Act or law.] (3) The resolution professional shall present to the committee of creditors for its approval such resolution plans which confirm the conditions referred to in sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. 1[Provided that the Adjudicating Authority shall, before passing an order for approval of resolution plan under this sub-section, satisfy that the resolution plan has provisions for its effective implementation.] (2) Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the resolution plan. (3) After the order of approval under sub-section (1),- (a) the moratorium order passed by the Adjudicating Authority 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. 2[(4) The resolution applicant shall, pursuant to the resolution plan approved under sub-section (1), obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances as narrated hereinabove, we are of the considered opinion and also satisfied that Resolution Plan as approved by the Committee of Creditors CoC meets the requirements as referred to under section 30(2) of the Insolvency and Bankruptcy Code, 2016 and therefore, IA 224 of 2018 is liable to be allowed as prayed for. Accordingly, we hereby approve the Resolution Plan dated 26.05.2018 along with Addendum dated 05.06.2018 submitted by the RP with approval of the CoC with following observations: (i) The Resolution Plan dated 26.05.2018 along with Addendum dated 05.06.2018 which is approved by the financial creditors of the CoC with voting share of 72.79% is hereby approved under the provisions of Section 31(1) of the Code which will be binding on the Corporate Debtor, its employees, members, creditors and other stake holders involved in the Resolution Plan. (ii) The approved Resolution Plan shall come into force with immediate effect. (iii) The Resolution Applicant shall pursuant to the Resolution Plan approved under section 31(1) of the Code, obtain the necessary approvals required under any laws for the time being in force within a period of one year from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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