TMI Blog2019 (7) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... , and thereafter, the Resolution Applicant is required to ensure that the company remains as a going concern but contrary to the provisions of the I B Code , closure of the Corporate Debtor has been proposed and approved by the Adjudicating Authority. In SWISS RIBBONS PVT. LTD. AND ANR. VERSUS UNION OF INDIA AND ORS. [ 2019 (1) TMI 1508 - SUPREME COURT] the Hon ble Supreme Court noticed the Preamble of the Code and held that the primary focus of the legislation is to ensure revival and continuation of the Corporate Debtor by protecting the Corporate Debtor from its own management and from a corporate s death by liquidation. As the Resolution Plan is against the object of the Code and the application under Section 10 was filed with intent of closure of the Corporate Debtor for a purpose other than for the resolution of insolvency, or liquidation, we hold that the part of the Resolution Plan which relates to closure of the Corporate Debtor / Corporate Applicant being against the scope and intent of the I B Code is in violation of Section 30(2)(e) of the I B Code - the part of the approved Resolution Plan in so far as it relates to closure of the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... renchment of all the workmen. 4. Two appeals have been preferred by Industrial Services - ( Operational Creditor ) alleging non-consideration of its claim by the Resolution Professional . 5. It is pleaded that the claim of the Appellant- Industrial Services was considered by the Resolution Professional which was initially accepted but subsequently given reference to a suit preferred by the Corporate Debtor against the Appellant, the claim of the Appellant have not been entertained. 6. The grievance of the Appellant- Industrial Services is that the suits were filed by the Corporate Debtor during the period of Moratorium against the Industrial Services and, therefore, the same cannot be taken into consideration to deny the admissible dues payable to the Industrial Services - ( Operational Creditor ). 7. Further, according to the Appellant- Industrial Services , the Corporate Applicant being ineligible in terms of Section 29A, the Resolution Plan submitted by the Corporate Applicant was not maintainable. 8. The other two appeals have been preferred by Burn Standard Ex- Employee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Calcutta residence of Darbhanga Raj, Assembly House, Grand Hotel Arcade, United Bank Building, New Secretariat Building, Club House at Eden Gardens. 2.0.2 The ever-increasing traffic movement between the twin cities of Calcutta (now Kolkata) Howrah demanded a wider and stronger bridge in replacement of the then existing pontoon bridge. The authorities accordingly decided on building a cantilever bridge across the river Hooghly. The job called greater expertise. So the three engineering giants - Braithwaite, Bum Jessop - came together with their vast experiences and floated a new company and constructed today's iconic Howrah Bridge. The Martin Burn company even 0 erated a line from Dum Baguiati till it closed down in 1955. 2.0.3 Burnpur works, earlier known Indian Standard Wagon Ltd., Burnpur, was founded in 1918. Since its early days the company developed excellence in manufacturing Railway wagons, forged components, Springs etc. 2.0.4 During the early days, Burn Company undertook building and contracting work. Subsequently in the 1950s of the last century, it ventured into the field of Railway Engineering, altogeth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd support from other agencies. 2.1.3 Accordingly, BIFR the Company to submit modified rehabilitation scheme based on the commitments of GOI for additional relief concessions. Subsequently GOI explored the possibility of dive of shares of the company. BIFR directed 1131, the operating agency to advertise for change of management but there was no response in this matter. Subsequently BIFR appointed United Bank of India as the operating agency (OA) on 14.11.2006. The company submitted a modified draft rehabilitation scheme which was discussed in a special joint meeting held on 30.05.2007. 2.1.4 Subsequently the Case was reviewed by BIFR on 28.11.2007 and after deliberations it was directed to submit another draft rehabilitation scheme to OA After incorporation of various views and decisions, McDermott International Inc prepared Modified Draft Rehabilitation Scheme (MDRS) which the company submitted to OA on 19.02.08. There were further developments and another Consultant, LB. Jha Co, Chartered Accountant Management Consultants, was engaged to revise the MDRS on the basis of developments in the meantime. Subsequently GOI mooted a proposal for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores which means that the Corporate Debtor on receipt of amount is in a position to pay the total dues of all the creditors, as appears from proposed strategy of Resolution Plan , which is as follows: CHAPTER - III RESOLUTION PLAN 0 Main strategy proposed 3.01 Ministry of Railways (Railways Board), Government of India , has communicated vide letter No. No.: 2010/M (W)/300/2 dated 12th Feb 2010 (copy enclosed as annexure - A) that the revival plan submitted by the company, vide their letter No. CMD: MOR: 136 dated 29/09/2016, was examined by the competent authority. The company has been incurring losses in spite of efforts and financial assistance provided to the company. Further, the performances of the company over the years has shown decline and there seems no prospect of revival/turn around in future as BSCL is engaged in mainly wagon manufacturing for which there is an already developed competitive market. 3.02 In view of the above, Ministry of Railways (Railway Board) has recommended closure of M/s. Bum Standard Company Limited. 3.03 Meanwhite a provision of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paid in the 1st Qtr. of 2018 -19 on receipt of fund from the Government of India (GOI). * Arear payment for all concerned officers against 1992 pay revision which has been admitted will be paid in the 2nd Qtr of 2018 -19 on receipt of fund from the Government of India (GOI). * All Government (dues of Government of India as well as dues of Government of West Bengal) will be paid within the 2nd Qtr of 2018 -19 on receipt of fund from the Government of India (GOI). * Voluntary Retirement Scheme (VRS) is to be Introduced. All the 500 employees on roll of the company will be offered VRS and final settlement will be done within 1st Qtr of 2018- 19 and effort will be made to pay all dues within in the 1st Qtr of 2018-19 on receipt of fund from the Government of India (GOI). Balance payment if any will be paid in the 2nd Qtr of 2018-19 3.1.3 Schedule of payment for the Resolution Plan: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance amount will be paid within 2nd Qtr. of 2018-19 * Other dues (Municipal Taxes) 3.50 3.50 Due amount will be paid within 2nd Qtr. of 2018-19 * Other dues (KoPT) licences fees) 7.00 7.00 Due amount will be paid within 2nd Qtr. of 2018-19 * Misc. other dues 10.00 10.00 Due amount will be paid within 2nd Qtr. of 2018-19 * Other Govt. of India due (ED). 66.71 66.71 Due amount will be paid within 2nd Qtr. of 2018-19 * VRS of all employees 112.37 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BURN STANDARP COMPANY LIMITED HEAD OFFICE Ref:CMD/CIRCULAR/234 GENERAL NOTICE 17th April, 2018 Sub: Closure of Burn Standard Company Limited This is for information of all concerned that Government of India has apporved closure of Burn Standard Company Limited on 04.04.2018. This is issued with the approval of Competent Authority To D(F), BSCL All Unit in Charge All Departmental Heads of HO Notice Board of HO, HW ad BW Company Secretary DM (Fin), HQ - This General Notice is to be published in the Company's website Intimating the employees and other stake holders of the Company about intended closure of the Company. 20. Simultaneously, order of retrenchment was issued on 25th September, 2018, as extracted below: BURN STANDARD COMPANY LIMITED (A Govt. of India Undertaking) 22-B, Raja S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7008 Bala Krishna Sundara Crane Driver 12. 7009 Panchanan Bag Welder 13. 7038 Uday Narayan Gond Tool Issuer 14. 7057 Md. Sawood Khan Co2 Weld/Auto Oprt. 15. 7064 Farooque Ahmed Co2 Weld. 16. 7085 Jhantu Kumar Bayen Fitter 17. 7075 Shiva Sankar Mondal Co2 Weld 18. 7428 Ash. Mohammad Mech. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10986 Jamil Ahamed Ansari Elect. 36. 14156 Gopal Chandra Das Mkr./Fitter 37. 14181 Pradip Kumar Sarkar Erc./Fitter 38. 15475 Himadri S. Jana Fitter 39. 15478 Gopal Byabortta Silling man 40. 15479 Basu Ch. Dey Fitter (B) STAFF Sl.No. Card No. Name Designation 1. 1206 Amal Bhattacharjee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. 270 Aditya Mahalo JM (Engineer) 2. 272 Samit Das JM (Engineer) 3. 283 Shrabani Pal JM (F A) 21. The Indian Railway was impleaded as party Respondent. When we asked to reply as to how Indian Railway can guide the Corporate Applicant to file Resolution Plan with proposal to close the Corporate Debtor , no satisfactory reply has been shown by the Indian Railway. 22. The past performance of the Corporate Debtor has been shown in the Resolution Plan which is as follows: 2.2 Past Performance of the Company 2013-14 2014-15 2015-16 2016-17 Net worth 404.79 382.13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2557 1768 1568 1912 1204 Coupler (Nos.) 91 92 420 1141 1945 2494 1898 Draft Gear (Nos.) 0 0 0 252 485 903 994 Molten Material (MT) 3032 5049 6232 4887 4965 5970 3842 Wagon Repair (Nos.) - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.94 2.52 2.39 1.72 Cash Accruals -20.60 25.85 -31.12 -13.56 Interest 5.43 5.78 10.62 8.04 PBDIT -15.29 -20.08 -20.51 -5.52 PBDIT/Sales -13.07% -17.38% -11.20% -2.21% PBT/Net Sales -21 08% -24.57% -18.30% -6.11% Net Profit /Net Sale -20.97% -24.57% -18.30% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25. Therefore, the question arises for consideration in these appeals are: ( i) Whether the Resolution Plan is against the statement of objects and reasons of the I B Code ? and; ( ii) Whether application under Section 10 was filed by the Corporate Applicant with malicious intent for any purpose other than for the resolution of insolvency, or liquidation of the Corporate Debtor , which on the facts and circumstances of the case as detailed above, we have hold that it was filed with intent for a purpose (i.e. closure of the Corporate Debtor ) which is other than for the resolution of insolvency and Section 65 of the I B Code . 26. In Swiss Ribbons Pvt. Ltd. Anr. vs. Union of India Ors.─ 2019 SCC OnLine SC 73 , the Hon ble Supreme Court noticed the Preamble of the Code and held that the primary focus of the legislation is to ensure revival and continuation of the Corporate Debtor by protecting the Corporate Debtor from its own management and from a corporate s death by liquidation, as quoted below: 19. The Preamble of the Code states as follows: An Act to cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. It can thus be seen that the primary focus of the legislation is to ensure revival and continuation of the corporate debtor by protecting the corporate debtor from its own management and from a corporate death by liquidation. The Code is thus a beneficial legislation which puts the corporate debtor back on its feet, not being a mere recovery legislation for creditors. The interests of the corporate debtor have, therefore, been bifurcated and separated from that of its promoters / those who are in management. Thus, the resolution process is not adversarial to the corporate debtor but, in fact, protective of its interests. The moratorium imposed by Section 14 is in the interest of the corporate debtor itself, thereby preserving the assets of the corporate debtor during the resolution process. The timelines within which the resolution process is to take place again protects the corporate debtor s assets from further dilution, and also protects all its creditors and workers by seeing that the resolution process goes through as fast as possible so that another management can, through 40 its entrepreneurial skills, resuscitate the corporate debtor to achie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idation, we hold that the part of the Resolution Plan which relates to closure of the Corporate Debtor / Corporate Applicant being against the scope and intent of the I B Code is in violation of Section 30(2)(e) of the I B Code . 30. With a view to give a quietus to the matter, we set aside the part of the approved Resolution Plan in so far as it relates to closure of the Corporate Debtor / Corporate Applicant but uphold the rest part of the Resolution Plan , as approved. 31. In view of such findings, the consequential orders, including the order of closure of the Company and the order of retrenchment dated 6th March, 2018 are also set aside. 32. The Corporate Debtor is directed to ensure that the company remains a going concern and employees are not retrenched. 33. So far as claim of the employees and their associations are concerned, with regard to their salary and other service benefits as the issue cannot be decided by this Appellate Tribunal, they are given liberty to raise all such issues before the Corporate Debtor who will decide the same. 34. The case is remitted to the Adjudi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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