TMI Blog2019 (9) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that it was instigated by the promoter director, we were not supplied any data, but we could not rule out that possibility too in the peculiar circumstances of the case in hand. There are no merit in the submission of the Ld. Counsel for the SREI that Mr. Anoop Krishna being a director of Shayam Metalics and Energy Limited SSN is a disqualified resolution applicant. It is significant to note here that Shayam Metalics and Energy Limited is not a successful resolution applicant. Truly the successful resolution applicant is a consortium of SSN and Shayam SEL and Power Ltd. In the absence of any materials brought out to prove that he is connected in any manner with SSN or its consortium members we are unable to hold that Mr. Anoop Krishna is connected with a company allegedly a group company of SSN and thereby entire process is vitiated by undue influence of an employee. Thus, the distribution methodology considering the value of security interest held by the FC's adopted by the CoC for distributing the resolution bid amount which has been approved by a vote of 74.41% is not contrary to any of the provisions of the Code or regulations and any of the principle of law settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, Reetobroto Mitra, Vikram Wadehra, Vidushi Chokhani, Soumava Ghosh, Advs., Rishav Banerjee and Zeeshan Haque ORDER Jinan K. R. , Member ( J ) All the above applications taken together for convenience and for avoiding repetition of facts and since common questions arises for consideration. CA(IB)No. 352/KB/2019 1. This is an Application filed by the Resolution Professional for approval of the Resolution Plan of M/s. Ramsarup Industries Limited/ Corporate Applicant which has been approved by the Committee of Creditors by a voting share of 74.41%. The Corporate Applicant/ M/s. Ramsarup Industries Limited had filed the CP(IB) No. 349/KB/2017 for initiating Corporate Insolvency Resolution Process (in short CIRP) on the allegations of inability to pay the debt. 2. The Application was admitted vide Order dated 08-01-2019 by appointing Mr. Nilesh Sharma as the Interim Resolution Professional. However at the request of the CoC vide order dated May 2, 2018 Resolution Professional Mr. Nilesh Sharma was replaced by Mr. Kshitiz Chhawchharia. Upon appointment of the Resolution Professional, the CIRP commenced against the Corporate Applicant, M/s. Ramsarup Industries Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt. Therefore, the Resolution Plan cannot be approved. 8. One another contention on the side of the Operational Creditors is that they were not given priority in payment over the Financial Creditors. Some of the Operational Creditors also raised objection that none of the Operational Creditors were given notice in participating the meeting and no copy of the Resolution Plan has been given to the Operational Creditors and therefore, there is flagrant violation of the provisions of the Insolvency Bankruptcy Code, 2016 (in the Code) and Regulations and therefore, the Resolution Plan cannot be approved. 9. The RP has objected all these applications. Upon hearing the arguments on both sides and considering the evidence and on perusal of the resolution plan, we come to the following conclusions:- (i) The amount claimed by the operational creditors need not be given priority in payment over financial creditors, but the amount due to the operational creditors under a resolution plan must be given priority in payment over financial creditors as per Regulation 38(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Corporate Debtor), must be furnished with copies of the resolution plan. The applicant OCs have failed in proving any violation of S.24(3) (c) of the Code, so we also do not find any merit in the above said objection on the side of the OCs. 10. Upon perusal of the proposed offer of the resolution applicant, it is understood that the very same treatment is proposed to be given to the OCs as is seen given to the Financial creditors as per the resolution plan. This is a case in which FCs have agreed to have a haircut of 94% and they would get 5.8% of their admitted claim of ₹ 5853.00 crores, and OCs in total would get 10.50 Crores out of the total admitted claim of 224.05 crores. That would come to 38.82%. The payment to the workmen is 90% of the admitted claim. The Statutory Authorities have been offered ₹ 3,00,00,000/- (Rupees Three Crores Only). Thus total percentage of aggregated claim of Operational Creditors inclusive of statutory Authorities would come to 5.82%. The above sad distribution of the bid amount clearly indicates that the Operational Creditors are given similar treatment as being given to the Financial Creditors. In the above said peculiar nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification and, therefore, is liable to be set aside. According to him, the Resolution plan is liable to be set aside. 15. Kotak Mahindra Bank filed affidavit in the form of objection objecting to the approval of the resolution plan challenging the methodology. The Kotak Mahindra Bank and Bank of India have not voted in favour of the Resolution Plan and therefore, they are dissenting Financial Creditors. The challenge against the distribution methodology on the basis of security interest is not at all sustainable under law for two reasons. 16. Firstly, this methodology as per the available records and as per the averments advanced on the side of the Resolution Professional, has been deliberated within the Committee of Creditors from 02-02-2019 onwards till the final deliberation in regard to voting for approval of the Resolution Plan, held on 16-03-2019. The copy of resolution brought to our notice also proves that the distribution methodology on the basis of security interest was approved by the Committee of Creditors by a vote of 74.41%. This distribution cannot be challenged under law by the dissenting Financial Creditors who are Kotak Mahindra Bank and Bank of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o issued loans to the Corporate Applicant which was subsequently assigned in favour of ARCIL and ARCIL, inter alia, had charge over the Kharagpur Unit. The Resolution Professional had seen examined the mortgage deed executed by IDBI and according to Ld. Counsel for the Resolution Professional, the Mortgage Deed executed by IDBI indicates that IDBI had a charge of the property of the Corporate Applicant situated at Kharagpur. 21. Both these objectors are the members of the Committee of Creditors and it is also understood that the security interest recorded for each Creditors has been made available to all the members of the Committee of Creditors before finalization of the approval of the Resolution Plan. Therefore, the challenge raised by the above said Financial Creditors claiming exclusive charge over the above said Plants is found devoid of any merits. They are estopped from contending that the RP has erred in recording the value of security interest of FCs after the approval of the methodology by the required majority wherein they were parties and participated in the discussions. On the other hand, the records available in the case proves that the position in regard to pari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as it belongs to it. The Ld. Counsel appearing for the Applicant submits that the Wind power Project of the Corporate Applicant is to be excluded from the Resolution Plan since the said assets were already recovered by Enforcement Directorate under the SARFAESI Act, 2002 and that the sale of the assets has been confirmed and the Applicant has realized the sale value. The Ld. Senior Counsel appearing for the Resolution Professional submits that the above said objection is unsustainable because the Debt Recovery Tribunal, Aurangabad stayed the sale stating that it was not conducted in accordance with the provisions of the SARFAESI Act, 2002 and that an Appeal preferred against the order of stay is pending before the Debt Recovery Appellate Tribunal. He further submits that the information memorandum includes the details of the pending litigation. Therefore, the Resolution Applicant is aware of the proceedings initiated under the SARFAESI Act, 2002. According to him, the Applicant IRDAI has been invited to be a member of the Committee of Creditors of the Corporate Applicant in regard to its claim against the Corporate Applicant and therefore, no prejudice is even caused to the Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est for distribution of the expenses by including in the upfront amount and raising the request first time by filing this application and that RP has no objection in issuing directions to the Resolution Applicant to pay the security expenses incurred by the Applicant which has been admitted in the Resolution Plan to be included in the upfront payment. The Ld. Counsel, appearing for the Resolution Applicant, also showed his readiness to pay the admitted amount of security expenses incurred by the Applicant as an upfront amount. Having regard to the above we are inclined to issue directions as prayed for. The said Application can be disposed of accordingly. 28. CA(IB)No. 461/KB/2019 is an Application filed by Shri Aashish Jhunjhunwala, Promoter Director of the Corporate Applicant/corporate Debtor challenging the approval of the Resolution Plan on the following grounds:- (i) The resolution bid amount is substantially below the liquidation value of the Corporate Debtor of which Resolution Plan does not conform to the maximization of the assets of the Corporate Debtor for the Financial Creditors and other stakeholders, (ii) The distribution modification must be on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be either modified or to be rejected, (c) The resolution plan cannot be conditional or contingent in nature. (d) The resolution applicant is disqualified u/s.29A of the Code as the resolution applicant is a related party to one BRG iron and steel Company Ltd in respect of which CIRP is already initiated. (e) The resolution plan deserves to be rejected since the entire CIRP has been manipulated and has been conducted not in accordance with the provisions of the Code and regulations. 31. Although several contentions are raised in the application filed by the Aashish Jhunjhunwala promoter Director of corporate applicant/corporate debtor, at the hearing of the applications (CA 461 and 462) Ld. Sr. Counsel Mr. Abhrajit Mitra restricted his argument to the following objections:- (a) The upfront amount payable by the Resolution Applicant is substantially below the liquidation value and the Resolution Plan does not call for maximization of the assets of the Corporate Debtor and therefore, liable to be rejected (b) That the charge in favour of ARCIL which has given 55% voting shares among the members in the Committee of Creditors has been recorded incorrectly. ARCIL is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d employee) 284.23 216.17 Operational Creditors(only Workmen and employees) 20.31 7.88 Total Claims 6351.31 6077.14 *Shall be subject to change if any till the Cut-Off Date 34. The following table summarizes the proposed offer as a part of the Resolution Plan to the financial creditors of the Corporate Debtor ( Financial Creditors ) as well as other creditors specified under the Code : Particulars Amount (in Rs. Crores) CIRP Process cost * [*i Sustainable Debt to be paid upfront to the Financial Creditors 351.0 Payment to Operational Creditors 3.50 Payment to Workmen 7.00 Payment towards Statutory Liabilities 3.00 Capex/Working Capital 306.00 *To be paid at actual 35. The above being the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner in which amount is to be distributed to them. However, they are to be given the same treatment, if similarly situated. The observation in paragraph 177 referred to above made it clearthat workmen cannot be equated with the class of operational creditors who have supplied goods and rendered services and, therefore, the contentions on the side of the Ld. Counsel appearing for the promoter- directors that the treatment given to the operational creditors and the workmen being different and they are similarly situated is found unsustainable. In view of the above-said discussion, we find no merits in the objections on the side of the promoter director as regards distribution of the bid amount. 38. The Ld. Sr. Counsel appearing for ARCIL brought our attention to the observations of IBBI advisory board who recommended amendment to the CIRP regulation. He read over its para No. 7 as under:- 7. Regulation 38(1)(c) provides that the liquidation value due to dissenting financial creditors shall be paid before any recoveries are made by the financial creditors who voted in favour of the resolution plan. Though the enterprise value (resolution value) is usually higher than the liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resolution Applicants though less than the liquidation value, it itself is not a ground for rejection of the Plan. We find no merit in the above said objection on the side of the promoter director of the Corporate Debtor. 40. The second objection stressed on the side of the promoter Director by the Ld. Senior Counsel is that the approval of the Resolution Plan only benefits the ARCIL and never balances the interest of all other stakeholders including the Financial Creditors and Operational Creditors because the ARCIL only held second charge over the security interest created to the assignors of the ARCIL and that if the Corporate Applicant Company goes into liquidation, the other Financial Creditors who dissented the approval of the Resolution Plan, would be more benefitted and thereby, the ARCIL who is having dominating voting percentage over others, decided to vote in favour of the Resolution Plan. 41. The above-said objection was also raised by the dissenting financial creditors and we found that the said objections are not sustainable as per the records available in this case. The Corporate guarantee and the mortgage deeds executed by the CD and Vanguard in the case in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NCLT, Mumbai Bench in the matter of Edelweiss Assets Reconstruction Co. Ltd. -vs- Bharati Defence and Infrastructure Ltd. that title of a property cannot be transferred in favour of resolution applicant. The facts in the above said judgment is not similar to the facts in the case in hand. Here in the instant case, the owner of Durgapur land, namely, Vanguard Credit Holding Pvt. Ltd. had already created mortgage over the land in favour of the Axis Bank and Punjab National Bank and since Vanguard Credit Holding Pvt. Ltd. has created mortgage over the land; created security interest over the land in favour of the Bank the right, interest and title in respect of the mortgaged land can be assigned in favour of the Resolution Applicant. Accordingly, that argument does not hold good in the context of objections raised in the case in hand. 43. At this juncture, an argument is also advanced from the side of the Promoter/Director of the Corporate Applicant referring to Section 18(1) (f) and Explanation (b) of section 8 of the Code and Regulation 37(a) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, that the mortgagee has no right to transfer title of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side of the Ld. Senior Counsel appearing for the Promoter Director/ Corporate Applicant that the action taken by Punjab National Bank as per Section 13 of the SARFAESI Act, 2002 and that taking possession of the land in exercise of its powers under Section 13(4) of the SARFAESI Act, 2002 will not give rise to any right over the Bank or ARCIL to transfer the right, interest of the mortgagee by way of assignment or sale. Section 13(4) of the SARFAESI Act, 2002, permits the secured Creditors to take possession of the secured assets including the right to transfer by way of lease, assignment or sale for realizing the secured assets. According to Ld. Sr. Counsel for the RP, the Bank referred to in the section includes its transferees and assignee's, and they will have the right to enforce possession under the SARFAESI Act, 2002 and therefore, transfer of all rights and interests in the Durgapur land and its marketable title to the Resolution Application, is perfectly legal and valid. 46. The third objection is about the distribution methodology which has been approved by the CoC by 74.41 % vote. According the Ld. Sr. counsel, the distribution of bid amount as per the Resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority and delaying the approval of the Plan. It is a bare contention without any supporting materials. The attempt on the side of the promoter director is that SSPL and SS naturals (resolution applicant) to be ineligible as a result of actions of a connected persons who was declared as NPA. But here in this case there is no proof to prove that resolution applicant is in any way connected to the company undergoing CIRP. The burden is heavy on the side of the objector to prove that the resolution applicant has direct control over the company undergoing CIRP for at least a period of one year from the date of commencement of CIRP. Such an evidence is lacking in the case in hand. So the said objection is found devoid of any merit. The resolution applicant is found eligible u/s 29A (j) of the Code. The above said discussions leads to a legitimate conclusion that any one of the objections on the side of the promoter director of the CD and Vanguard are sustainable under law and both applications deserve dismissal. 49. An argument was advanced at this juncture on the side of the Resolution Professional as well as on the side of the ARCIL that the Promoter Director is only attempting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the assets of the Corporate Debtor in favour of the ARCIL. In answering its objection, we hold that RP has not committed any error in recording the security interest hold by the Financial Creditors as per the available records brought to his notice. There was no traces of concealment of facts on the side of the RP but there are suppression of material facts on the side of the promoter director. 51. Ld. Sr. Counsel, Mr. S. N. Mookherjee, appearing for ARCIL submits that the promoter-director, who has filed CA(IB) No. 461/KB/2019, has instigated Vanguard Credit Holding Pvt. Ltd., by filing CA(IB) No. 462/KB/2019 wherein he had 99.99% shareholding to see that the resolution plan cannot be approved and his company is ordered to be liquidated. He further would submit that the promotor director did not come with clean hands to this Tribunal and the above said application is liable to be dismissed with exemplary costs. 52. In order to highlight his conduct in dealing with the shares he holds in the Ramsarup Industries Ltd/Corporate Applicant, he has cited an Adjudication Order (SS/AS/2018-19/1625) of the Securities and Exchange Board of India and referred to paragraph 14 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2019 is an application filed by Orissa Metaliks Private Limited (OMPL) challenging the eligibility of H-1 bidder S.S. Natural Resources Pvt. Ltd. (SS Natural) (Successful Resolution applicant) u/s. 29A of the I B Code, 2016. The Ld. Sr. Counsel, Mr. Abhrajit Mitra, appearing for and on behalf of the OMPL submits that one of the directors of the SS Natural Mr. Bajranglal Agarwal is a common director in the SS Natural, Shyam Emco Infrastructure Limited and Emco Power Limited and since Emco Ltd. is a defaulter in repayment of loan and interest and as the account of Emco Ltd. has become NPA is being under the management or control of the SS Natural or its promoters, the SS Natural has become ineligible to submit a resolution in respect of the Corporate Debtor u/s. 29A of the Code. No material has been brought to substantiate the said contention that Mr. Bajranglal Agarwal has got control over the management of Shyam Emco Infrastructure Limited. From the available records and arguments advanced on both side what we understood is that the applicant is trying to set up a case that Mr. Bajranglal Agarwal is a shareholder in BRG Iron Steel Company Private Ltd. which has been declared a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst round. In the initial period of bidding process, the CoC after deliberation agreed to re-consider the resolution applicants bid and decided to re-conduct the out-bid process with all the eligible bidders. In the said out-bid process OMPL did not improve its bid and thereby SS Natural out-bid the OMPL and became H-1 bidder. It is thereafter that the above said challenge came from the side of the OMPL/resolution applicant. So the conduct of the OMPL who had failed in out-bidding at the re-conducting outbid process, who also failed in convincing the CoC that SS Natural is not eligible under Section 29A of the Code filed this application challenging the very same objection, knowing well that its objections were over-ruled by the CoC, without any additional evidence over and above the evidence led in before the Resolution Professional and CoC, approached this Tribunal and interfered in the process of approval of the plan without any justifiable or sufficient cause. In the said circumstances, we are of the considered view that this application deserve dismissal with costs. Considering the nature and circumstances of the contentions raised, awarding a cost of ₹ 5 lakh would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant. The above said factors brought out from the copies of minutes is self explanatory. Possibility of leaking any data for enabling the bidders to increase its bids never, ever arose in the said process adopted by the CoC. None of the resolution applicants is to be influenced by an insider or outsider. The outbidding process was conducted transparently and diligently. It is significant to note here that other than SREI, none other raised the said contention. The contention of the applicant is frivolous and raised only for the purpose of abusing the process by the unsuccessful bidder. Though an allegation was raised that it was instigated by the promoter director, we were not supplied any data, but we could not rule out that possibility too in the peculiar circumstances of the case in hand. The promoter director was present in the Tribunal on all days of hearing this CP, and he rushed in front of us denying the allegation and submits that he never wished to have an order liquidating his company. He also sought permission to make his submissions in person which we declined since Sr. Counsel was already appearing for him. 62. We also do not find any merit in the submission of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied that none of the objections raised on the side of the objectors are worth consideration except CA filed by WBIDCL (CA 921 of 2019), are ordered to be dismissed. In the said circumstances, let us take the resolution plan. 66. The question is whether the application filed by the RP (CA 352 of 2019) for the approval of the resolution plan of consortium of SSN and Shyam SEL and Power Ltd. approved by the CoC by vote of 74.41% deserves to be approved?. 67. Though a form H is not required to be filed in this case since this application was filed before the amendment to CIRP regulation came into being, we directed the RP to file a Form H and he filed the same. The resolution plan that came up for our consideration is a plan approved by the CoC by a vote of 74.41%. Except certain wavier clause like, procedural requirement under the companies Act, waiver of any fee payable to any stock exchange, statutory liabilities other than operational debt specified in the information memorandum, Stamp duty and ROC fees in case of increase in the authorised capital etc., claimed as per the plan which according to us cannot be approved for the reason that those statutory fees, and taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of manufacturing Steel, TMT Bars and Steel Wires. Its manufacturing units are situated in Kharagpur, Durgapur, Shyamnagar and Kalyani. It also owned a windmill located at Dhule. However its manufacturing units had not been in operation for more than 10 years. According to the Resolution Applicant, the assets of the Corporate Debtor, including the plant and machinery are not in a working condition and considerable investment is required to be made before the factory and the plant and machinery of the Corporate Debtor can be made operational. This facts brought to our notice is unchallenged. It is in the said circumstance we found that out of 670.50 crore of the resolution bid amount keeping ₹ 306.00 crore included in the resolution bid as Capex/Working Capital for enabling it to run the CD Company as an on going concern is not unreasonable. 72. The resolution applicant is experienced in Iron and Steel/Ferro alloys Sector. As per the data furnished the group company namely Shayam group has an established position in the ferro-alloy industry with track record of around two decades and huge experience of successful running and scaling up operations. Having run si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor. The Corporate Debtor has been taken over by a Resolution Applicant who can safeguard the Company by infusing some healthy blood in to the dying flesh. 78. Having regard to what has been said above we hereby approve the resolution plan upon the following directions:- ORDERS i) The Resolution Plan of Ramsarup Industries Ltd., which is approved by the CoC with 74.41% voting share, is hereby approved under provisions of sub-section (1) of Section 31 of the Insolvency and Bankruptcy Code, 2016, which shall be binding on the Corporate Debtor, M/s. Ramsarup industries Limited, its employees, members, creditors, guarantors, the central Government, any State Government or any local authority and other stakeholders involved in the Resolution Plan subject to the below mentioned modification. ii) The Resolution Plan approved by the CoC shall include the portion of security expenses incurred by the Financial Creditor/ West Bengal Industrial Development Corporation Limited(WBIDCL) which is admitted by the RP in the upfront amount payable by the Resolution Applicant to the Creditors. iii) The Resolution Plan, shall come into force from the date of pronouncement of this ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
