TMI Blog2019 (9) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... er cent majority of voting share. The Resolution Plan also confirms to such other requirements as may be specified by the Board - On perusal of the Resolution Plan, it is found that it meets the requirement of Section 31 r/w Section 30(2) of the Code as well as Section 29A of the Code. Therefore, the present application IA 236 of 2019 is allowed with following observations. The Resolution Applicant has sought certain reliefs and waivers. However, the Resolution Applicant under Section 6, Part V of the Resolution Plan has stated that any relief(s) requested to be granted by the NCLT to the Resolution Applicant shall not be construed as condition for the implementation of this Resolution Plan. This Adjudicating Authority is of the considered view that these are the matters related with the concerned competent authorities, hence the Resolution Applicant may approach those competent authorities for relief(s) and waivers sought by them, for their consideration - The Resolution Applicant has liberty to approach this Adjudicating Authority for appropriate directions/clarifications, as the case may be, in case there is any hindrance in the effective implementation of the Resolution P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Insolvency Resolution Process of Korba West Power Company Limited (hereinafter referred to as Corporate Debtor ) having registered office at First Floor, E-122, Patel Nagar, City Centre, Site No. 2, Gwalior, Madhya Pradesh. 2.2 The said CP(IB) No. 190/2018 was admitted on 26.07.2018 by this Adjudicating Authority and appointed Shri Abhijit Guhathakurta, as the Interim Resolution Professional (hereinafter referred to as IRP ). Subsequently, Shri Abhijit Guhathakurta was confirmed as the Resolution professional for the Corporate Debtor in accordance with Section 22 of the Code by the Committee of Creditors (hereinafter referred to as CoC ) of the Corporate Debtor in its first meeting held on 10.09.2018. 2.3 The Resolution Professional, so appointed, made public announcement on 07.08.2018 as per the provisions of section 15 of the Code read with Regulation 6 of the CIR Regulations inviting all stakeholders including financial creditors of the Corporate Debtor to submit their claims by 17.08.2018. Pursuant to the public announcement, the Resolution Professional received claims of ₹ 5034.79 crores from 19 financial creditors out of which claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor to all 7 (seven) prospective resolution applicants in the provisional list provided by the Resolution professional, in terms of Section 29 of the Code and Regulation 36B of the CIR Regulations. 3.4 Subsequently, in terms of Regulation 36(A)(12), the Resolution Professional vide his email dated 27.11.2018 provided a final list of resolution applicants, to the members of the CoC who successfully met the Qualification Criteria. 3.5 It is stated that Resolution Professional also appointed registered valuers, viz. CRRE South Asia Private Limited and RBSA Valuation Advisors LLP to determine the liquidation value and fair value of the Corporate Debtor in terms of Regulation 35 of the CIR regulations. The liquidation value as determined in accordance with Regulation 35 of the CIR Regulations stood at ₹ 1454.93 crores and the average fair value of the Corporate Debtor stood at ₹ 2496.36 crores. 4. In the meantime, this Adjudicating Authority, by way of its order dated 22.01.2019 allowed additional time of 90 days beyond 180 days for completion of the CIR process, on the application so made by the Resolution Professional on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the Resolution Plan duly approved by the CoC and affirming that he has verified the contents of the Resolution Plan and confirmed that it complies with the requirements envisaged under Regulation 38 of the CIR Regulations as well as Section 30 of the Code, and sought for approval of the Resolution Plan by this Adjudicating Authority. The Resolution Professional has submitted a detailed Table showing the compliances of the Resolution Plan with the mandatory requirements under the Code and CIR Regulations to support his contention, which said Plan has also been approved by the CoC having 69.08 per cent of voting in favour of the Resolution Plan. The Table showing the compliances is given hereunder: The compliance of the Resolution Plan is as under: Section of the Code Regulation No. Requirement with respect to Resolution Plan Section of Resolution Plan Compliance (Yes/No) 25(2)(h) Whether the Resolution Applicant meets the criteria approved by the CoC having regard to the complexity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (b) Has been approved by the CoC with 66% voting share? NA Yes (c) Section 31(1) Whether the Resolution Plan has provisions for its effective implementation plan, according to the CoC? NA Nil Regulation 35A Where the Resolution Professional made a determination if the Corporate Debtor has been subjected to any transaction of the nature covered under section 43, 45, 50 or 66, before the one hundred and fifteen day of the insolvency commencement date, under intimation to the Board? NA Nil Resolution 38(1) Whether the Resolution Plan gives priority to the amount due to the operational creditors in payment over financial creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has provisions for its effective implementation? Section 8 Yes (d) It has provisions for approvals required and the timeline for the same? Section 9 Yes (e) The resolution applicant has the capability to implement the resolution plan? Schedule 2 Yes 39(2) Whether the RP has filed applications in respect of transactions observed, found or determined by him? NA Nil Regulation 39(4) Provide details of performance security received, as referred to in sub-regulation (4A) of Regulation 36B. NA Yes. Provided separately. 7. The details of financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.07% 12. State Bank of India(SBP) 147.01 147.01 2.92% 13. Syndicate Bank 131.94 131.94 2.62% 14. Edelweiss ARC(SBT) 123.10 123.10 2.45% 15. United Bank of India 118.88 118.88 2.36% 16. Dena Bank 114.03 114.03 2.27% 17. Andhra Bank 110.69 110.69 2.20% 18. SR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 179.44 9. On perusal of the records, it is found that amounts provided for the stakeholders under the Resolution Plan as given by the Resolution Professional in its Compliance Certificate, in the form of Form H, are as under: (Amount in Rs. Crores) Sr. No Category of Stakeholder Amount Claimed Amount Admitted Amount Provided under the Plan Amount Provided to the Amount Claimed (%) 1. Secured Financial Creditors 3,349.45 3,346.83 1100 32.84% 2. Unsecured Financial Creditors 1,685.35 1,685.35 1,685.35 100.00% 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operational Creditors (including any Governmental Authorities) (if any) in respect of their Admitted Operational Creditors Debt, in priority to payment to any Financial Creditors. In view of the above, post the payment of Liquidation Value, all dues of the Operational Creditors (excluding any Workmen and Employee) shall be written off in full and shall be, and be deemed to be, permanently extinguished as on the NCLT Approval Date. However, in the interest of keeping the Project operational and for running the Corporate Debtor as a going concern, the Resolution Applicant proposes to provide ex gratia amount of INR 104.28 crores to the Operational Creditors (excluding employees and Workmen) within 6 (six) months from the Effective Date, or such other date(s) as may be mutually agreed with the relevant Operational Creditor. 10.3 It is also submitted that the Resolution Applicant will make upfront cash payment of ₹ 100 crores to the Secured Financial Creditors on pro rata basis. It is also submitted that the Resolution Applicant estimates (a) fund infusion of up to INR 594 crores to meet capital expenditure requirements of the Corporate Debtor and (b) additional ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the proceeds are insufficient to meet the debts in full; and (b) the term workmen's dues shall have the same meaning as assigned to it in section 326 of the Companies Act, 2013 (18 of 2013). 12. Thus, Section 53 of the Code lists the priorities to be given to the beneficiaries, of liquidation value of the assets of the Corporate Debtor. The provisions of Section 53 make it amply clear that Operational Creditors are at the end of the list of beneficiaries as the Secured Financial Creditors have edge over the others. 13. It would also be pertinent to mention here that Operational Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective of the I B Code is sacrosanct. The said objective of the I B Code is also affirmed by Hon'ble Supreme Court in Arcelor Mittal India (P.) Ltd. v. Satish Kumar Gupta ors wherein the Hon'ble Supreme Court observed that the Corporate Debtor consists of several employees and workmen whose daily bread is dependent on the outcome of the CIRP. If there is resolution applicant who can continue to run the corporate debtor as a going concern, every effort must be made to try and see that this is made possible. Resolution Plan The 'Insolvency Bankruptcy Code' defines 'Resolution Plan' as a plan for insolvency resolution of the 'Corporate Debtor' as a going concern. It does not spell out the shape, colour and texture of 'Resolution Plan', which is left to imagination stakeholders. Read with long title of the 'I B Code', functionally, the 'Resolution Plan' must resolve insolvency (rescue a failing, but viable business); should maximize the value of assets of the 'Corporate Debtor', and should promote entrepreneurship, availability of credit and balance the interests of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 the CoC much less to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. From the legislative history and the background in which the I B Code has been enacted, it is noticed that a completely new approach has been adopted for speeding up the recovery of the debt due from the defaulting companies. 39. In our view, neither the adjudicating authority (NCLT) nor the appellate authority (NCLAT) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that is only an opinion of the minority financial creditors. The fact that substantial or majority per cent of financial creditors have accorded approval to the resolution plan would be of no avail, unless the approval is by a vote of not less than 75% (after amendment of 2018 w.e.f. 06.06.2018, 66%) of voting share of the financial creditors. To put it differently, the action of liquidation process postulated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution 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 are completely within the domain of the financial creditors who are called upon to vote on the resolution plan under section 30(4) of the I B Code. ' 15. Objections of the Corporation Bank - the dissenting Financial Creditor During the course of arguments, the Corporation Bank filed their objections through engaged lawyer being dissenting Financial Creditor, objecting the approval of the Resolution Plan by this Adjudicating Authority. It is submitted by the Ld. lawyer of the Corporation Bank that Resolution Plan approved by the CoC does not meet and is not in conformity of the requirements of Section 30(2) of the IBC; suit the vested interest of the Resolution Applicant some of the members of the CoC; the purchase price is undervalued and depressed and fails to achieve the Fair Market Value and the Resolution Plan has failed to maximize the value of the assets of the Corporate Debtor, the Forensic Audit Report has not been circulated/provided amongst the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan- (a) provides for the payment of insolvency resolution process costs in a manner specified by the Board in priority to the payment of other debts of the corporate debtor; (b) provides for the 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority. 17. On perusal of the records, it is found that the Resolution Plan confirms to the criteria as provided under clauses (a) to (f) in section 30(2) of the Code and the CoC approved the Resolution Plan by 69.08 per cent majority of voting share. The Resolution Plan also confirms to such other requirements as may be specified by the Board. On perusal of the Resolution Plan, it is found that it meets the requirement of Section 31 r/w Section 30(2) of the Code as well as Section 29A of the Code. Therefore, the present application IA 236 of 2019 is allowed with following observations. 18. The Resolution Applicant has sought certain reliefs and waivers. However, the Resolution Applicant under Section 6, Part V of the Resolution Plan has stated that any relief(s) requested to be granted by the NCLT to the Resolution Applicant shall not be construed as condition for the implementation of this Resolution Plan. 18.1 This Adjudicating Authority has carefully gone through the reliefs and waivers sought by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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