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TMI Blog2019 (8) TMI 1528X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Debtor has defaulted in payment of rent of aforesaid machinery. 2. At the outset, the RP states that the Applicant has filed the claim in the capacity of a Financial Creditor, however, the rental dues fall under the category of 'Operational Debt'. The Applicant was given ample opportunity to file its claim in the correct form, but it failed to do so, and therefore no such claim pertaining to outstanding rentals persists as on date. 3. Regardless of other contentions of the Operational Creditor, the RP's submissions are that one of the Directors of the Operational Creditor i.e. Mr. Anand Narayan Kadam was a General Manager of the Corporate Debtor at the relevant time, and thus falling under the head "key managerial personnel" of the Corporate Debtor as stated in section 5(24)(b) of the I&B Code defining the primary term "Related Party". Section 5(24)(b) of the I&B Code says that "related party" in relation to a corporate debtor means: "(a) ..... (b) a key managerial personnel of the corporate debtor or a relative of a key managerial personnel of the corporate debtor". 4. To this contention of RP, it is stated by the Applicant/Operational Creditor that the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2018], wherein the Hon'ble Appellate Court had held that CoC once voted in favour of the Resolution plan, cannot change its views later. Respectfully following the ratio-decidendi , I am of the view that the Resolution Plan of the Corporate Debtor cannot be entertained by the coC at such belated stage. Time is the essence of the Code. The main object of the code is revival of sick companies in a time-bound manner and hence, by allowing this application I am conscientiously not inclined to set a wrong precedent for the implementation of the provisions of the Code. The timelines prescribed in the Code have to be adhered to in order to achieve the object of the Code. The Applicant cannot be allowed to file the Resolution plan after the completion of 270 days, that too after the application for approval of Resolution plan has already been filed before this Bench, as well as , when there is no CoC in existence. The CoC has already taken a decision in its commercial wisdom, which cannot be changed or altered. Hence, MA 2104/2019 is hereby rejected. C. Miscellaneous Application No. 662/2019 8. An Application has been moved on 15.02.2019 by the Learned Resolution Professional by invok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice at Gat No. 892, Near Ingavale Mala Alate, Hatkanangale, Kolhapur, Maharashtra, 416109, was approved. 13. As per the Resolution Plan, the Resolution Applicants undertook to induct funds, either by way of additional equity or by way of debt, to implement the Resolution Plan. In compliance of Section 29A of the I&B Code and Regulation 38(2) of the IBBI (Insolvency Resolution process for Corporate persons) Regulations, 2016, a declaration has been submitted that the Resolution Applicants do not suffer from any of the disqualifications contemplated under section 29A and further under Regulation 38(2), they have submitted a term of the plan as well as an implementation schedule thereof. 14. The RP states that Bharat Co-operative Bank (Mumbai) Ltd. has issued a Letter dated 06.02.2019 bearing reference no. BCB/DHK/412/2019 in favour of the Resolution Applicant for granting an in-principle sanction for a term loan and cash credit for the amount of INR 20,00,00,000/- and INR 11,00,00,000/- respectively. The Balance Sheet and Profit & Loss Statements of the Resolution Applicant as on 31.12.2018 have been duly perused by the RP. The Certificates of Net Worth of the Resolution Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing and supplying Ethanol. Sai Agro (India) Chemicals chaired by Mr. Vijay Prakash Nade and Mr. Satish Satyanarayan Dandnaik. Some brief about Partners - 1) Mr. Vijay Prakash Nade - Mr Nade, having age 41, currently hold position of Chairman and Managing Director of DDN SFA Ltd. DDN SFA has a 1000 TCD Jaggery production plant in Osmanabad, Maharashtra. He has more than 15 years of experience in the Sugar Industry Business. Mr. Nade has also vast experience in agro products. Mr. Nade associates with many firms and company like - * M/s. DDN SFA Ltd. Mr. Nade has also best experience in turning around business. Recently DDN SFA Ltd took over Sri Shambhu Mahadev Shakari Sakhar Karkhana Tal. Kalmb, Dist. Osmanabad, which was closed for last 2 years. The said plant now merged into DDN SFA Ltd. 2) Mr. Satish Satyanarayan Dandnaik - Mr. Dandnaik, having age of 46, currently hold position of Chairperson of Yashwant Multistate Bank. He serves as the Director of Osmanabad DCC Bank and also he held position of President of Osmanabad District Urban and Credit Society federation. He comes from the finance background and has terrific knowledge in financials. Mr. Nade an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. 70,00,000 10 7,00,00,000 50 % TOTAL 1,40,00,000 10 14,00,00,000 100 The necessary changes to the memorandum and articles of the company shall be made appropriately, if required. e. Raising fresh debt in the Company The Company shall avail fresh working capital limit of Rs. 10 Cr. In the event of infusion of debt, such debt shall be arranged without any obligation on members of CoC to provide such funds. Summary of the proposed funds infusion; Source of Funds First 30 -180 days Equity 14,00,00,000 Debt 21,00,00,000 Working Capital Limits 10,00,00,000 Total Sources of Funds 45,00,00,000 It is understood that in order to raise working capital limits of Rs. 10 Cr. as indicated above, the existing lenders shall be required to release all charges/ liens/ securities of assets of the company. The secured creditors shall release such charge only for the purpose and subject to raising such funds. In case the amount of Rs. 18.53 Cr. is not paid to banks within timelines indicated under this plan, the lenders shall regain the charges so released. In that case, the earnest money shall be forfeited and default shall be penalised. Fixed deposit Of Rs. 15 Lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial creditor Particulars Claims (Rs. Cr.) Total Recovery (Rs. Cr.) % Recovery (Approx) Karad urban Co-op Bank Limited 30.27 18.16 60 Janakalyan Nagari Sah. Patasanstha 0.62 0.37 60 Total 30.89 18.53 60 l. Treatment of claims of various stakeholders and operational creditors As per Regulation 38(1) of Insolvency and Bankruptcy Regulations 2016, the amount due to the operational creditors shall be paid in priority to the financial creditors which shall in any event be made before expiry of 30 days after the approval of a resolution plan by the Adjudicating Authority. In the current case, the liquidation value payable to the operational creditors (except Workmen's dues of 24 months preceding liquidation) is NIL. The Resolution Applicants propose to settle various creditors including operational creditors in the following manner; ▪ Insolvency Resolution Process Costs Insolvency Resolution Process Costs will be paid in priority over payments to all Creditors. The Insolvency Resolution Process Costs, to the extent that it remains outstanding, shall be first duly paid by the Corporate Debtor from its accruals and distributable cash. The CIRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropose to pay all other creditors in a manner explained above. Additionally, all workers and employees will continue to be employed with the company. This makes this proposed plan balanced. n. Claims after approval of the Proposed Plan The Code and the CIRP Regulations entitle all creditors of a corporate debtor to submit their claims to the RP on or prior to the date on which the resolution plan gets approved by the adjudicating authority. As a result, in the event any Creditor of the Company does not submit claims to the RP prior to the Effective Date, the said Creditor will not be entitled to receive any payments under the Proposed Plan. The unclaimed amounts shall stand extinguished and become NIL. o. Payments of contingent liabilities Any claims not received under CIRP shall be extinguished and will not be payable and shall stand to be extinguished and NIL. All contingent liabilities including statutory liabilities till the approval of resolution plan by the adjudicating authority shall stand extinguished. p. Treatment of Security Secured creditors may be in possession of collaterals securities and personal guarantees of the existing promotors. Resolution Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days from the effective date. Any change in the actual CIRP Cost will not affect the total pay-out of Rs. 18.53 Cr. as provided in the Resolution Plan. The CIRP Costs shall include (but not be limited to) the professional fees for services rendered by RP, his support team, legal advisors, valuers and all the incidental expenses incurred by the RP and his team. The Resolution Applicant proposes to pay 100% towards dues of workers/employees and statutory authorities in full. The proposed payment under the plan would be 100% as against NIL in a liquidation scenario. 6. TIMELINE No Activity Proposed Timeline (Days) PHASE I - APPROVAL OF PROPOSED PLAN BY Committee of Creditors 1 Presentation and approval of Proposed Plan to the CoC X 3 Application to NCLT X+5 4. Receipt of certified copy of the NCLT's order of approving resolution plan E 5. Public Announcement (if required) E+30 6. Intimation to the CoC, IBBI, RBI, Tax authorities and various other statutory authorities (as applicable) 7. Intimation to all Creditors, existing shareholders and other stakeholders of the Company PHASE II - SETTLEMENT OF CREDITORS 1. Payment of CIRP Cost E+30 2. Payment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts including soft copies of books of accounts of corporate debtor. d. Continued Corporate Existence The Company shall continue its operations in the normal course of business. While the implementation of the Proposed Plan and settlement of the Creditors happen in parallel, the newly appointed Board shall take up the responsibilities of the day to day affairs of the Company and manage it in its regular course. e. Corporate Actions The Company shall take appropriate corporate actions necessary for implementation of the all the provisions of the Proposed Plan, which includes (i) filing of appropriate documents or forms with, inter alia, RoC, MCA and RBI and obtaining relevant consents / approvals from such regulatory authorities, (ii) intimation to existing shareholders, (iii) execution of share transfer deed as provided in the plan and (iv) regular compliance as per the governing laws f. Books of Accounts The Company shall reinstate its books of accounts upon implementation of the Proposed Plan. The Auditor shall confirm on reinstatement and regular maintenance of books of accounts as per the Proposed Plan. g. Release of Resolution Professional and Dissolution of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional documents viz. Memorandum of Association and Articles of Association of the Company as required under the proposed plan within 180 days of the Effective date. The Company, its stakeholders, the proposed Resolution Applicants and the proposed new management of the Company shall be bound by such revised constitutional documents. b. Execution of the material agreements by the Resolution Applicant The Resolution Applicant shall execute material agreements as required under the plan, initiate approvals and process to subscribe to equity shares of the Company and infuse funds as required under the Proposed Plan within 180 days from the Effective Date. c. Binding Effect This Proposed Plan once approved by the CoC and then the NCLT shall be binding on the Company, all holders of claims, Creditors, members, statutory authorities, promoters and all other parties in interest and each of their respective successors and assigns. d. Pending Litigations Pending and ongoing litigations / legal proceedings against or by the Company: It is hereby clarified and agreed that all the legal suits and proceedings that have been initiated against the Company in relation to recovery of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plementable following the Long Stop Date. j. Failure of Resolution Plan Upon non achievement of following, the financial creditors and or the Resolution Applicants shall have option to declare resolution plan as a failure consequent to which the Company shall go into liquidation, however condonation of delay on timelines can be allowed by the financial creditors at their discretion. 1) Non-payment of CIRP cost within 30 days from the effective date 2) Non-payment of employees/workers and statutory dues within 180 days respectively from effective date 3) Non-payment of Rs. 18.53 Cr. within 180 days of effective date 4) Failure to release security by the CoC within the prescribed time limit 5) Litigations / appeals filed against the resolution plan by any stakeholder if upheld by the relevant adjudicating authority k. Consequences of Revocation In the event the Proposed Plan is revoked and/or fails, the existing facilities of the Creditors (as mentioned hereof), the rights and remedies of the Creditors under their respective existing financing documents would continue as if they had not been waived, amended, modified, superseded or replaced by the Proposed Plan and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 Yes b. Provides for the payment of the debts of operational creditors? 5.13 Yes c. Provides for the management of the affairs of the corporate debtor? Clause 8 Yes d. Provides for the implementation and supervision of the resolution plan? Clause 9 Yes e. contravenes any of the provisions of the law for the time being in force Clause 11 No Section 30(4) Whether the Resolution Plan Yes a. is feasible and viable, according to the CoC? Annexure - A Yes b. has been approved by the CoC with 66% voting share? Yes Section 31(1) Whether the Resolution Plan has provisions for its effective implementation plan, according to the CoC? Clause 9 Yes Regulation 35A Where the resolution professional made a determination if the corporate debtor has been subjected to any transaction of the nature covered under sections 43, 45, 50 or 66, before the one hundred and fifteenth day of the insolvency commencement date, under intimation to the Board? No Regulation 38 (1) Whether the Resolution Plan identifies specific sources of funds that will be used to pay the - Annexure and 5.13 Yes a. Insolvency resolution process costs? Yes b. Liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e declare the foregoing details to be true. Mr. Vijay Nade Resolution Applicant Mr. Satish Dandnaik (Resolution Applicant)" SELF-DECLARATION CERTIFICATE OF RESOLUTION APPLICANT'S AS PER REGULATION 38 OF IBBI CIRP REGULATIONS This is a self-declaration certificate address to the Committee of Creditors (CoC) and Resolution Professional (RP) in addition to the Resolution Plan and other disclosers submitted by us, to enable the COC and RP to assess our credibility to take a prudent decision while considering the resolution plan for its approval. Sr No. Creditability Contents Declaration (a) Identity; PAN and Aadhar Card are provided. (b) Conviction for any offence, if any, during the preceding five years; NO (c) Criminal proceedings pending, if any; NO (d) disqualification, if any, under Companies Act, 2013, to act as a director; NO (e) identification as a willful defaulter, if any, by any bank or financial institution or consortium thereof in accordance with the guidelines of the Reserve Bank of India; NO (f) debarment, if any, from accessing to, or trading in, securities markets under any order or directions of the Securities and Exchange Board of India,; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion a thorough study of a Resolution Plan is required before recording a "satisfaction" in writing by AA. The 'satisfaction' as mandated in the statute can either objective or subjective or both, but it is a condition precedent. Naturally 'satisfaction' is to be recorded in writing with reasons after proper application of mind. The pros and cons of the scheme is required to be studied before recording subjective satisfaction. If the CoC has submitted the scheme of Resolution after visualising the advantage and disadvantage then such proposal can be termed as just and equitable fit for according satisfaction. An 'objective satisfaction' revolves around the object of enactment of the Code as enshrined in the Preamble of the I & B Code i.e. to revive the financially stressed corporate body. And the 'subjective satisfaction' depends upon logical analysis of the Financial Data supplied so as to match with the business model of the Corporate Debtor. A methodical scrutiny of Financial Statement is expected before concurring with approval of the CoC. Per contra, absence of recording of subjective satisfaction may lead to situation that, being sanctioned without judicial analysis, thus may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act, 1985 or under other such enactments which has now been forsaken. Besides, the commercial wisdom of the CoC has been given paramount status without any judicial intervention, for ensuring completion of the stated processes within the timelines prescribed by the I&B Code. There is an intrinsic assumption that financial creditors are fully informed about the viability of the corporate debtor and feasibility of the proposed resolution plan. They act on the basis of thorough examination of the proposed resolution plan and assessment made by their team of experts. The opinion on the subject matter expressed by them after due deliberations in the CoC meetings through voting, as per voting shares, is a collective business decision. The legislature, consciously, has not provided any ground to challenge the "commercial wisdom" of the individual financial creditors or their collective decision before the adjudicating authority. That is made non-justiciable". 21. To conclude, the approval of a Resolution Plan can be accepted U/s 31 (1) IBC by Adjudicating Authority after considering feasibility and viability recorded by COC ( refer Sec. 30(4) IBC ) with a 75%/66% voting share consentin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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