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TMI Blog2019 (12) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Operational Creditor under Section 9 of the Code seeking initiation of Corporate Insolvency Resolution Process against Shaifali Rolls Limited (hereinafter referred to as "Corporate Debtor") having registered address at Block No. 1563, Sola, Kalol, Village Santej, Kalol in the State of Gujarat. 2.2 The said CP(IB) No. 162/2018 was admitted on 14.09.2018 by this Adjudicating Authority and appointed Shri Parag Sheth, as the Interim Resolution Professional (hereinafter referred to as "IRP") under Section 13(1) of the Code, in respect of the Corporate Debtor 2.3 The Resolution Professional, so appointed, made a public announcement inviting claims from all the creditors in Form A of the Schedule Il as per Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as "Regulations") on 20th September, 2018 in Business Standard and Jai Hind where the registered office of the Corporate Debtor is situated. 2.4 It is stated that pursuant to the public announcement, the IRP inter alia received claims from the creditors of the Corporate Debtor and pursuant to Section 21 of the Code, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the CIRP period by 90 days beyond 180 days which expired on 12.03.2019. 4. It is stated that RP received two resolution plans, one from Legend Trade Corp and the other from M/S. Fitcast. The Resolution Plan received from Legend Trade Corp was rejected by the COC whereas the Resolution Plan received from M/S. (hereinafter referred to as "RA") was discussed and deliberated upon by the COC. In the said fourth meeting of COC, RP informed the COC that Central Bank of India has declared Corporate Debtor and its directors Mr. Prakash Shah and Mr. Sangeeta Shah as willful defaulters who are also shareholders of M/S. Fitcast, i.e. the RA and which may frustrate the chances of M/S. Fitcast being an eligible RA. However, the notarized affidavit submitted by M/S. Fitcast stating that Mr. Prakash Shah is neither part of the management nor having any controlling authority in the management at present, therefore as per Explanation No. (i) and (ii) of connected persons given in the Code, mitigates the negativity, in eligibility prospects of M/S. Fitcast under Section 29A of the Code. However, it was decided to take a *legal opinion regarding eligibility of M/S. Fitcast before the last date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Adjudicating Authority. The compliance of the Resolution Plan: Section of the Code Regulation No. Requirements with respect to Resolution Plan Clause of Resolution Plan Compliance (Yes / No) 25(2)(h) Where the Resolution Applicant meets the criteria approved by the Committee of Creditors having regard to the complexity and scale of operations of business of the Co rate Debtor? Clause No. 10. Page No.43 Yes Section 29A Whether the Resolution Applicant is eligible to submit resolution plan as per final list of Resolution Professional or Order, if any, of the Adjudicating Authority ? Clause No. 10, Page No.43 Yes Section 30(1) Whether the Resolution Applicant has submitted an affidavit stating that it is eligible? - Yes Section 30(2) Whether the Resolution Plan: (a) provides for the payment of insolvency resolution process costs? (b) provides for the payment of the debts of operational creditors? (c) provides for the of the managements affairs of the Corporate debtor? (d) provides for implementation of supervision resolution plan? (e) contravenes any of the provisions of the law for the time bein in force? Clause 7.2, Page No.30 Clause 7.3, Page No.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling Eol up to approval of the Resolution Plan by the COC in its eighth meeting held on 3rd June, 2019 and E-voting for the aforesaid Resolution Plan held on 4th June, 2019 submitted the Resolution Plan duly approved by the COC and affirming that the aforesaid Resolution Plan complies with the provisions of Section 30(2) of the Code and Regulation 38(3A) of the CIRP Regulations and sought for approval of the Resolution Plan by this Adjudicating Authority. 6.2 The Resolution Applicant in pursuance to the Public Notice dated 26tY December, 2018 submitted the Plan relating to the insolvency resolution process of Shaifali Rolls Limited, Corporate Debtor under the provisions of Insolvency and Bankruptcy Code, 2016 and the rules and regulations framed there under. 6.3 On perusal of the Resolution Plan, it is found that Resolution Applicanl viz. M/S. Fitcast Founders & Engineers Private Limited, is a compan) engaged in the manufacturing and marketing of CI Castings and othel Castings which are having a direct relevance with the business of thc Corporate Debtor and accordingly, the promoters are to be considered from the same line of business having better understanding of thc manufac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfuse Rs. 0.78 Crore and will get Equity Shares of Corporate Debtor worth Rs. 0.78 Crore In the name of Fitcast Founders &Engineers Private Limited Payment to the Financial Creditors (excluding the Related Party Creditor) refer clause no. 7.5 for the detailed explanation and financial outlay) 16,00,00,000* -1.78 Crore- Within T+2 Days (for Performance Commitment) -2.25 Crore- Within T+180 Days -12 Crore- Within T+360 Days Para 7.5 in Page No. 32 The RA will infuse Rs. 6 Crore and will get Equity Shares of Corporate Debtor worth Rs. 6 Crore in the name of Fitcast Founders Engineers Private Limited. -Omkara ARC shall pay to the existing bankers Rs. 10 Crores against the assignment of Debt. Further this amount shall be termed as Restructured term loan in the books of Corporate Debtor after the approval of resolution plan. -Out of Rs. 12 Payment to Related Party Creditors & Existing Shareholders of the Corporate Debtor NIL NA NA Payment towards Contingency Fund NIL NA NA Additional Capital Expenditure 50,00,000 As per technical assessment The RA will infuse Rs. 0.50 Crore and will get Equity Shares of Corporate Debtor worth Rs. 0.50 Crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lan. 6.8 Liquidation Value: The Liquidation Value of the Corporate Debtor Company has been taker at Rs. 6.9 Payment to Operational Creditors: Operational Creditors shall be paid Rs. 0.25 crores being 10% of the Rs. 2.53 crores as stated in the Resolution Plan. 6.10 Payment to Statutory Creditors: Statutory creditors of the Corporate Debtor who have already given thei claims or whose cases are going on, shall be paid an amount of Rs. crores as per the Resolution Plan. Sr. No. Operational Creditors / Statutory Authority Original Dues (Rs. In Crores) Proposed Amount (Rs. In Crores) 1. Unsecured Creditors 2.53 0.25 2. VAT/ Sales Tax Liability 3.87 0.39 3. Custom Duty 0.20 0.02 4. Excise Duty 1.00 0.10 5. Professional Tax 0.0438 0.0044 6. Property Tax 0.01 0.014 Total 0.78* *This includes payment of Rs. 0.25 crores to Operational Creditors as mentioned in Para 6.9 above 6.11 Payment towards Personal as well as Corporate Guarantee: Out of Rs. 12 crore, which is to be paid within a period of 360 days, Rs. 1 crore shall be specifically paid to existing bankers towards Corporate as well as Personal Guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (ii) Debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52; iii. Wages and any unpaid dues owned to employees other than workmen for the period of twelve months preceding the liquidation commencement date; iv. Financial debts owed to unsecured creditors; v. The following dues shall rank equally between and among the following: - (i) Any amount due to the Central Government and the State Government including the amount to be received on 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; vi. Any remaining debts and dues; vii. Preference shareholders, if any; and viii. Equity shareholders or partners, as the case may be. (2) Any contractual arrangement between recipients under sub-section (I) with equal ranking, if disrupting the order of priority under that sub- section shall be disregarded by the liquidator. (3) The fees pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to try and see that this is made possible. Resolution Plan The 'I&B 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, color and texture of 'Resolution Plan', which is left to imagination of 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 all the stakeholders. it is pertinent to mention herein that the Hon 'ble Supreme Court has observed in the matter of K. Sashidhar Vs. Indian Overseas Bank & Ors that National Company Law Tribunal has no jurisdiction and authority to analyze or evaluate the commercial decision of the Committee of Creditors (COC) to enquire into the justness of the rejection of the resolution plan by the dissenting financial creditors. The said position is also reaffirmed by the Hon 'ble Supreme Court in Arcelor Mittal case recently pronounced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 (2). 5["(4) The committee of creditors may approve a resolution plan by a vote of not less than 6[sixty-six] per cent. of voting share of the financial creditors, after considering its feasibility and viability, and such other requirements as may be specified by the Board: Provided that the committee of creditors shall not approve a resolution plan, submitted before the commencement of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, where the resolution applicant is ineligible under section 29A and may require the resolution professional to invite afresh resolution plan where no other resolution plan is available with it: Provided further that where the resolution applicant referred to in the first proviso is ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by the committee of creditors such period, not exceeding thirty days, to make payment of overdue amounts in accordance with th ..... 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