TMI Blog2020 (2) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... ause of the resolution plan individually as well as the resolution plan as a whole in its entirety. Therefore, the appropriation of the said ₹ 68.98 crores by the resolution applicant is approved by the CoC and can be taken as the decision of the CoC upon the said amount as per our order dated 12.03.2019. The Resolution Professional has cited the judgment of Hon'ble Supreme Court in the case of Managing Director, ECIL, v. Karunakar [1993 (10) TMI 310 - SUPREME COURT] , wherein the Five Judge Bench of the Hon'ble Supreme Court has held that while a court of law promulgates a new principle, its application is made prospective. The resolution plan approved with modifications, which shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors, Resolution Applicant and other stakeholders involved in the resolution plan - List on 1.8.2019 for filing additional affidavit of Resolution applicant regarding acceptance of the modifications in the Resolution Plan and submitting the other informations. - MA NOS. 1428, 1721, 1746 & 1816 OF 2019, CP (IB) NO. 1371 & 1372 (MB) OF 2017 - - - Dated:- 24-7-2019 - V.P. Singh Judicial, Judicial Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval by e-voting, the approved evaluation matrix was included in the Process Memorandum dated 7.3.2018, which was amended on 11.4.2018. To avail access to the VDR and conduct site visits from 23.3.2018 till 2.5.2018, eligible applicants were to deposit ₹ 10 crores and ₹ 40 crores. 6. The Process Memorandum contained various terms and conditions about resolution plans to be submitted such as a deposit of EMD of ₹ 50,00,00,000/- in two tranches, performance deposit of ₹ 150,00,00,000/- as clear funds. 7. The RP has invited submission of resolution plans from prospective eligible Resolution Applicants in Form G on 18.4.2018, as per Regulation 36A(5) of the CIRP Regulations. The last date for submission of the resolution plan was 2.5.2018. The RP received resolution plans submitted by four resolution applicants by 11:00 a.m. on 2.5.2018, i.e. from Adani Wilmar Limited (AWL), consortium of Patanjali Ayurved Limited, Divya Yog Mandir Trust (through its business undertaking, Divya Pharmacy), Patanjali Parivahan Pvt Ltd and Patanjali Gramudhyog Nyas (collectively, Patanjali Consortium), Godrej Agrovet Limited (Godrej) and Emami Agrotech Limited (Emami). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by AWL was approved by CoC with a vote share of 96.85%, the applicant filed MA 926/2018 under Section 30(6) of IBC, 2016 before this Bench for approval of the resolution plan submitted by AWL. While the MA 926/2018 was pending for consideration before this Bench, Hon'ble Supreme Court by its order in Vijay Kumar Jain v. Standard Chartered Bank [2019] 102 taxmann.com 14/152 SCL 56 directed as under: 18. We may indicate that the time that has been utilised in these proceedings must be excluded from the period of the resolution process of the corporate debtor as has been held in Arcelor Mittal India Private Limited v. Satish Kumar Gupta Ors., Civil Appeal Nos. 9402-9405/2018 [decided on 04.10.2018] (at paragraph 83). In each of these cases, the appellants will be given copies of all resolution plans submitted to the CoC within two weeks from the date of this judgment. The resolution applicant in each of these cases will then convene a meeting of the CoC within two weeks after that, which will include the appellants as participants. The CoC will then deliberate on the resolution plans afresh and either reject them or approve of them with the requisite majority, after which, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arnest Money Deposit of ₹ 50,00,00,000/- (Rupees Fifty Crores only) deposited in favour of the Corporate Debtor in the designated bank accounts, amounting to a sum of ₹ 200,00,00,000/- crores (Rupees Two Hundred Crores Only) Remaining 4.75 crores (Four Crores and Seventy-Five Lakhs Only) to be generated out of internal accruals of the Resolution Applicant. 2 Non-Convertible Debentures subscribed by Resolution Applicant in SPV 450.00 To be subscribed by Patanjali Ayurved Limited. Break up of fund- infusion of ₹ 900,00,00,000/- (Rupees Nine Hundred Crores only) for subscription to these instruments: ₹ 300, 00,00,000/-(Rupees Three Hundred Crores only) -In-Principle Sanction Letter for Funding from Bank of Baroda in favour of Patanjali Ayurved Limited, provided at page 483 of the Application. The remaining sum of ₹ 600,00,00,000/-(Rupees Six Hundred crores only) 3 Preference shares subscribed by PAL in SPV 450.00 -To be generated out of internal funding/internal accruals/cash flow of the Reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Actuals as approved by the CoC (i) Insolvency Resolution Process costs to be paid in full and in priority to any Claim of any other creditor as on the Closing Date. (ii) To be paid out of the internal accruals/cash flow of the Corporate Debtor. 2 Secured Financial Creditors 8377.42 4053.19 (i) In the event the amount payable towards the Workmen and Employee dues, as on the Effective Date, is less than ₹ 14.92 crores, the excess amount shall be additionally paid to the secured financial creditors. (ii) In the event, the amount of uninvoked bank guarantee is less than the amount currently allocated towards the contribution for providing counter-guarantee or 100% margin as against the existing guarantees; then the excess amount would be additionally paid to the secured financial creditors. (iii) All claims or liabilities etc. owed to the secured financial creditors by the Corporate Debtor proposed to stand extinguished upon the receipt of the said amount by them under the approval of the resolution plan by the Hon'ble NCLT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Operational Creditors, whichever is higher, on a pro-rata basis, has been proposed to be paid to the operational creditors of the Corporate Debtor. (ii) Amounts due to operational creditors proposed to be made in priority to the financial creditors. (iii) All claims or liabilities etc owed to any Operational Creditor by the Corporate Debtor, in relation to any period prior to the Effective Date or on acquisition of control of the Corporate Debtor by the Resolution Applicant through the SPV proposed to stand extinguished upon the receipt of the said amount by the operational creditors pursuant to the approval of the resolution plan by the Hon'ble NCLT. (iv) Only ₹ 14,31,62,68,911/-is said to be claimed by unrelated parties. As per the resolution plan, the amounts proposed by the resolution applicant for operational creditors is to be distributed amongst those that are unrelated parties. 7 Providing counter guarantee/ 100% margin/replacement of existing bank guarantees that are not invoked N/A 11.89 (i) The said amount is the amount of the uninvoked bank guarantee as in forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on competition in India. 24. Therefore, in light of the order of the Competition Commission of India as aforementioned, the Resolution Plan is not in violation of the Competition Act, 2002. The RP has certified, as per Regulation 39 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, that the contents of the resolution plan, as approved by the Committee of Creditors with more than 66% majority in favour, meets all the requirements of the I B Code and the regulations as applicable on the date thereof. 25. The Resolution Applicant proposes that IRP Costs be paid in full by the Closing Date that is not more than 75 days from the Effective Date and in priority to any Claim of any other creditor, out of the internal accruals/cash flow of the Corporate Debtor. It is further provided that all costs, expenditure incurred / to be incurred by the Committee of Creditors towards the CIRP of the Corporate Debtor ( CoC Costs ) shall be fully borne by the CoC except to the extent of ₹ 2 crores which shall be paid by the Corporate Debtor out of the internal accruals/cash flow of the Corporate Debtor on or prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olution Applicant proposes to reconstitute the board of directors of the Corporate Debtor as necessary, to spearhead their business plan and the proposed nominated members on the board of directors of the Corporate Debtor are (a) Shri Acharya Balkrishna (b) Shri Ram Bharat; and (c) Smt. Sneh Bharat. The Resolution Applicant further proposes to identify other members of the board of directors and the same shall be appointed in compliance with all Applicable Law on the expiry of the Term. The Resolution Applicant also proposes to retain the existing senior management personnel of the Corporate Debtor and will further appoint additional members as key managerial personnel to spearhead and strengthen the business and operations of the Company. The implementation of the Plan will be supervised by the Monitoring Agent, until Closing Date. 29. The Resolution Applicant has dealt with the interests of all stakeholders in the Corporate Debtor, including the Financial Creditors and the operational creditors. 30. The Resolution Applicant has declared that neither the Resolution Applicant nor any of its related parties have failed to implement or contribute to the failure of implementatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 8.1.13 it is prayed that all the respective Governmental Authorities shall waive of any stamp duty, filing fees, Tax payable to the Governmental Authority or such other amounts payable / becoming payable on the transaction or actions contemplated under this Resolution Plan including but not limited to increase in authorized share capital of the Corporate Debtor and the stamp duty payable on amalgamation of the SPV with the Corporate Debtor. We are not inclined to allow the said relief. The Resolution Applicant may apply to the relevant regulatory authority for this exemption and the relevant authority may consider it as per law. 36. Concerning the relief sought in clause 8.1.10 regarding modification, change, or termination of the contract entered by the Corporate Debtor, with either related party or unrelated party of the Corporate Debtor or existing promoters, no unilateral right of modification, change, or termination of contract can be allowed. However, the Resolution Applicant may modify, change or terminate any contract as per the due process of law. 37. As per the Information Memorandum, all the intellectual property rights including brands, trademarks, copyrights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication/petition filed in relation to ownership and/or usage by RSIL of the intellectual property rights, including arbitration petition no. MJC AV/0000023/2018 filed during the moratorium period or any other legal proceedings to be initiated in relation thereto and the said proceedings shall follow their complete course as per law without being affected by this order. 38. Any relief sought for in the Resolution Plan, where the contract/agreement/understanding/proceedings/actions/notice etc. is not specifically identified or is for future and contingent liability, is at this moment rejected. 39. The Resolution Applicant, on taking control of the Corporate Debtor, shall ensure compliance under all applicable law for the time being in force. 40. We shall clarify here that any resolution applicant shall takeover the Corporate Debtor with all its assets and liabilities as per terms of the approved Resolution Plan. If any relief concerning any identified liability of the Corporate Debtor is required, then that needs to be specifically mentioned and sought for in the Resolution Plan. This bench cannot allow any general power to any resolution applicant absolving him of liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the petition and appeal must be allowed and the NCLAT judgment set aside. 46. It is stated that the CIRP period in the present case will expire on 07.05.2019. As per Regulation 39(4) of CIRP Regulation, Resolution Plan as approved by the CoC is to be filed with the Adjudicating Authority 15 days in advance of the expiry of CIRP. Accordingly, the 255 days for submitting the Resolution Plan as contemplated under Regulation 39(4) will expire on 22.04.2019. The Resolution Professional has stated that it may not be possible for the final Resolution plan to be placed before this CoC and sufficient time to be provided to the CoC to obtain the requisite authorisation to consider such Resolution Plan when it is put to the vote. The Resolution Professional submits that the CIRP is in its concluding stage, and the relaxation of the timeline will enhance the chances of successful resolution of the Corporate Debtor. It is also submitted that the Regulation 39(4) was amended on 03.07.2018 to provide that the Resolution Professional shall endeavour to file the approved Resolution Plan with Adjudicating authority atleast 15 days before the last date of CIRP. 47. There is no opposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that recovery for lender under a Resolution Plan ought not to be less than what it would have recovered from the sale of debtor's assets in liquidation, where such under-recovery would benefit other lenders who would recover more than the liquidation value of their security assets. During the meeting, when the Resolution Professional called for a vote by show of hands on this proposal of the DBS, no one responded affirmatively, and the CoC opined that was within their commercial wisdom to approve of a Resolution Plan in compliance with the law and accordingly approved pari passu distribution amongst all secured Financial Creditors. The Resolution Plan was approved on 30.04.2019 by 96.95% vote share of CoC. 53. The DBS submitted that the availability and terms of credit are influenced by several factors, including the quality and value of the security. The facility was extended among other things, on the consideration that the Applicant would be granted an exclusive charge over Fixed Assets of considerable value. It is contended that creditors with different security interests having different values are distinctly placed and not similarly placed. Thus, it is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the lenders should be restrained because if the amounts are already distributed amongst all lenders, then the DBS would not be able to recover its rightful amounts which are wrongfully distributed to the lenders. 57. The DBS, vide its written submission dated 14.05.2019, has also placed on record an order of Ld. NCLT, Hyderabad Bench in IDBI Bank v. Mamta Binani in [CP (IB) No. 41/7/HDB/2017 dated 09-05-2019] wherein the Ld. Tribunal has held that the creditors may be given a different proportion of their debt from the resolution fund based upon the value of assets held by each creditor. The relevant portion upon which the DBS has sought to place reliance is reproduced below: Financial Creditor holding the security interest over the assets of Corporate Debtor were given higher amount from out of the Resolution Fund than those who are not holding the security interest or holding security interest which is lower in value. This grouping of Financial Creditors does not amount to any discrimination. The creditors who are having valuable assets are to be given higher percentage from out of the Resolution Fund than those who are holding less value of the assets it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely to ensure that the resolution plans submitted are complete in all respects before they are placed before the Committee of Creditors, who may or may not approve it. The fact that the Resolution Professional is also to confirm that a resolution plan does not contravene any of the provisions of law for the time-being in force, including Section 29A of the Code, only means that his prima facie opinion is to be given to the Committee of Creditors that a law has or has not been contravened. Section 30(2)(e) does not empower the Resolution Professional to decide whether the resolution plan does or does not contravene the provisions of law. 61. It is further submitted by the Resolution Professional that the waterfall of distribution under section 53 for Financial Creditors only sets out the distinction between 'debts owed to Secured Creditors' and 'Financial debt owed to Unsecured Creditors'. Section 53 or the definition of 'Secured Creditors' in the Code does not set out any distinction among the secured creditors based on priority of their charge/ranking of security over the assets of the Corporate Debtor. It is stated that the proposed distribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liquidation value to the dissenting 'Financial Creditor(s)' in view of clause (b) and (c) of Regulation 38(1), without any other reason to discriminate between two set of creditors similarly situated such as 'Financial Creditors' or the 'Operational Creditors' cannot be approved being illegal. 64. The Resolution Professional has submitted that the decision in Essar Steel Ltd. (supra.) will not affect the order of approval of Resolution Plan passed in the present matter as a prospective declaration of law binds the sub-ordinate forums to apply dictum to cases which would arise in future only and where decision opposed to the said principles has been taken prior to such declaration of law then such matters cannot be interfered with on the basis of such prospective declaration of law. 65. To support the above contention that the decision in Essar Steel Ltd. (supra.) will not affect the order of approval of Resolution Plan passed in the present matter, the Resolution Professional has sought reliance on Judgements of Hon'ble Supreme Court in Baburam v. C.C. Jacob AIR 1999 SC 1845 and Madras Bar Association v. Union of India [2014] 49 taxmann.com 515/22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment is provided for at the time of liquidation under Section 53 of the Code. However, the Code does not provide for the creation of such distinction at the time of accepting a resolution plan submitted for the Corporate Debtor. 72. The CoC has also submitted that the distribution of funds in the resolution plan is approved by all financial creditors other than DBS in exercise of their commercial wisdom. The majority decision to distribute the amounts in a pari passu manner is said to be a commercial decision of the CoC made in line with the decision of Hon'ble NCLAT in Jyoti Structures case (supra). The appeal against Jyoti Structures case (supra) has been dismissed by the Hon'ble Supreme Court. Further, the CoC has submitted that in the light of the judgement of Hon'ble Supreme Court, in the matter of K. Sashidhar v. Indian Overseas Bank, [2019] 102 taxmann.com 139/152 SCL 312, there is no provision in the I B Code that empower the Resolution Professional, the Adjudicating Authority or even the Appellate Authority to reverse the commercial decision of the CoC. 73. We have heard the arguments of both sides in the MA 1746/2019 and perused the records. The DBS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions about certain Letters of Credit. The said application was allowed by order of this Bench dated 12.03.2019 wherein; inter alia, it was directed to the ICICI to reverse the amount ₹ 65.98 crores debited from the current account of the Corporate Debtor about the LCs. This Bench also directed the CoC to decide on the appropriation of ₹ 65.98 crores. 78. The ICICI challenged the order of this Bench dated 12.03.2019, before the Hon'ble NCLAT by way of Company Appeal (AT) (Insolvency) No.370 of 2019 which remains pending at the moment with directions not to force the ICICI to return the amount as per this Bench's order. 79. The ICICI addressed its concern to the RP and CoC that in case it is required to refund the amounts, the claim of the ICICI against the Corporate Debtor would stand increased to the extent of the refund. In the 22nd CoC meeting, the members of the CoC are said to have decided that the distribution of proceeds was required to be finalised based on the admitted claims before voting and the same cannot be changed subsequently. The Resolution Professional informed the CoC in its 23rd meeting that he cannot admit the additional claim of the IC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution plan with a 96.95% majority; it can be safely presumed that CoC considered, evaluated and approved every clause of the resolution plan individually as well as the resolution plan as a whole in its entirety. Therefore, the appropriation of the said ₹ 68.98 crores by the resolution applicant is approved by the CoC and can be taken as the decision of the CoC upon the said amount as per our order dated 12.03.2019. 83. The Resolution Professional has filed its written submissions on 15.05.2019 opposing the Application filed by the ICICI. The Resolution Professional has referred to Regulation 13 of CIRP Regulations to state that it has to admit claims of Creditors as on the Insolvency Commencement Date. The relevant portion of Regulation 13 relied upon by the Resolution Professional is reproduced below: The interim resolution professional or the resolution professional, as the case may be, shall verify every claim, as on the insolvency commencement date, within seven days from the last date of the receipt of the claims, and thereupon maintain a list of creditors containing names of creditors along with the amount claimed by them, the amount of their claims admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the secured claims and the effect is provided in the following note Admission of additional claim is allowed Admitted Claim as revised Total recovery in amount and percentage if the Appeal is allowed (i.e. the Applicant retains the entire Impugned Amount) Total recovery in amount and percentage if the Appeal is not allowed The percentage recovery of other Secured Financial Creditors. Original admitted claim secured portion amount ₹ 483.63 crores + Additional Claim ₹ 65.83 crores = ₹ 549.46 crores. Currently proposed recovery for the secured portion is ₹ 234.20 crores + the Impugned Amount ₹ 65.98 crores: ₹ 300.18 crores. Percentage recovery for the secured portion will be 54.63% The secured portion of the claim will be ₹ 549.46 crores and proposed for that portion will be ₹ 234.20 crores. Percentage recovery on the secured portion is 42.6% The proposed recovery for the secured portion of the claim of all other financial creditors is 48.4% Admission of additional claim is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of the Hon'ble NCLAT before the Hon'ble Supreme Court that has passed an order of stay over the judgment and for maintaining status quo. Thus, it is submitted that the judgment of the Hon'ble NCLAT is sub-judice. Further, it is submitted that a bill to amend the I B Code has been approved by the Cabinet which, among other things, seeks to bring amendment for 'inclusion of commercial consideration in the manner of distribution proposed in a resolution plan, within the powers of the Committee of Creditors'. 90. In addition to the above submissions, the Resolution Professional has cited the judgment of Hon'ble Supreme Court in the case of Managing Director, ECIL, v. Karunakar [1993] 4 Supreme Court Cases 727, wherein the Five Judge Bench of the Hon'ble Supreme Court has held that while a court of law promulgates a new principle, its application is made prospective. The relevant paragraph in the said judgment on which the Resolution Professional has relied is reproduced below: It would, thus, be clear that the Supreme Court of the United States of America has consistently, while overruling previous law or laying a new principle, made its ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r debt amount. Also, there were numerous operational creditors who opposed the approved resolution plan. In contrast, the approved resolution plan submitted before us for approval has allotted ₹ 90 crores for payment to the unrelated operational creditors, which amounts to 6.28% of their total verified claim. This is notably higher than the proposed payment of ₹ 40 crores offered to unsecured financial creditors amounting to 3.97% of their total verified claim. Also, there is no opposition filed against this approved resolution plan by any of the operational creditors as of now. We think that the decision of the Hon'ble NCLAT in the Essar Steel case (supra.) and that of the Hon'ble Supreme Court in an appeal against the same would not have any adverse bearing upon the approval of the present case before us. 92. In light of the above decision of the Hon'ble Supreme Court and adhering to the objective of the I B Code, we do not wish to keep the approval of this resolution plan in abeyance till the final judgment of the Hon'ble Supreme Court against the decision of the Hon'ble NCLAT in Essar Steel case (supra.) is delivered. 93. Given the above ob ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
