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TMI Blog2021 (3) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... nsolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as the Regulations) seeking sanction of resolution plan dated 13.03.2019 as restated on 07.05.2019 along with addendums dated 08.05.2019 & 16.05.2019 as approved in the tenth meeting of the Committee of Creditors (CoC) through e-voting held on 18.05.2019 and concluded on 20.05.2019. 2. It has been submitted that the insolvency petition was filed by the operational creditor i.e. Weather Makers Private Limited under Section 9 of the Code for initiation of Corporate Insolvency Resolution Process (CIRP) in the case of M/s Parabolic Drugs Ltd. (hereinafter referred to as Corporate Debtor) and the same was admitted vide order 23.08.2018. It is submitted that vide order dated 30.08.2018, Mr. Sanjay Kumar Aggarwal was appointed as Interim Resolution Professional (IRP), but subsequently Mr. Sanjay Kumar Aggarwal was replaced and Mr. Raj Kumar Ralhan was appointed as RP vide order dated 08.10.2018. The IRP is stated to have issued a public announcement as per Regulation 6 of the Regulations read with Section 15 of the Code in Form A in newspapers of both r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion applicants for their evaluation and preparation of their respective resolution plans for the corporate debtor. 8. It is submitted that after publication of Form G on 12.11.2018, the RP received EOI from six potential investors out of which 5 were eligible prospective resolution applicants namely, (a) JM Financial Asset Reconstruction Company Limited, (b) Dhanuka Laboratories Ltd. (c) Meghani LLP, (d) Shiva Consultants Private Limited and (e) IOL Chemicals & Pharmaceuticals Limited. 9. It is submitted that in the third meeting of the CoC on 29.11.2018, the CoC under the provisions of the Code read with Regulation 36B of the CIRP Regulations decided the issuance of Request for Resolution Plan ("RFRP") to the prospective resolution applicants and in terms of Section 25(2)(h) of the Code, the RP released a RFRP dated 04.12.2018 thereby detailing each step in the process, and the manner and purposes of interaction between the RP and the prospective resolution applicant, along with corresponding timelines and inviting resolution plans from the prospective eligible resolution applicants. 10. It is also submitted that after the last date of submission of EOI, the RP received request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.05.2019. 15. The RP has filed compliance certificate in Form H (Pg. No. 17-121 Dy.232/4 dt.17.09.2020) as required under I&B Code (Amendment) Ordinance 2018 No.6 of 2018 dated 06.06.2018. It is certified by the RP in para 4 of Form H that the resolution plan complies with all the provisions of the Code, CIRP Regulations and does not contravene any of the provision of law for the time being in force and that the resolution plan stands duly approved by the 71.67% of the voting share of the financial creditors. It is also stated in para 4 (ii) of Form H that the affidavit of the successful resolution applicant regarding its eligibility under Section 29A of the Code is in order. Copy of the affidavit of the resolution applicant regarding its eligibility under 29A is attached as Annexure A-24 of the application. 16. It is also submitted that CoC while accepting the bid had taken care of all the provisions and Regulations. It is prayed that the application may be allowed and resolution as approved by the CoC in the CIRP of the Corporate Debtor be approved. 17. The learned counsel for the RP submitted that as per revised/updated Form H (Pg. No. 17-121 Dy.232/4 dt.17.09.2020), all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 558 10369@ 6.8% 2 Unsecured Financial Creditors (a) Creditors not having a right to vote under subsection (2) of section 21 NA NA NA NA (b) Other than (a) above: (i) who did not vote in favour of the resolution Plan (ii) who voted in favour of the resolution plan NA NA NA NA Total[(a) + (b)] - - - - 3 Operational Creditors (a) Related Party of Corporate Debtor - - - - (b) Other than (a) above: (i) Government 45,044 32,394 375 1.2% (ii)Workmen & Employees 427 379 376 99.1% (iii) Other Operational Creditors 9071 4800 375 7.8% Total [(a) + (b)] 54541 37573 1126 3.0% 4 Other debts and dues - - - - - Grand Total 206099 189131 11495 6.1% Further, the applicant has also offered Equity shares representing 10% (ten percent) of the issued, subscribed and paid-up share capital of the Corporate Debtor as on Closing Date as defined in the resolution plan to the assenting financial creditors which is not included in the amount. It is not feasible to assign a value to the equity component. #Amount provided over time under the Resolution Plan and includes estimated value of non-cash components. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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? -NA- The Resolution Professional had appointed a Transaction Auditor to conduct the transaction audit of the transaction entered into by the Corporate Debtor. The Auditor has submitted the Report on 07.01.2019. Accordingly, the RP has filed Application being CA No, 74/2019 with the Hon'ble Adjudicating Authority. Regulation 38 (1) Whether the amount due to the operational creditors under the resolution plan has been given priority in payment over financial creditors? The amendment in Regulation 38(1) has come into effect from 28.11.2019 while the Resolution Plan was approved by the CoC on 20.05.2019 therefore, the said amended Regulation does not apply on the present Resolution Plan. Regulation 38(1A) Whether the resolution plan includes a statement as to how it has dealt with the interests of all stakeholders? Part II Cl. 5 at Pg. 69 Yes Regulation 38(1B) (i) Whether the Resolution Applicant or any of its related parties has faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this sub-section, satisfy that the resolution plan has provisions for its effective implementation." 24. The conditions provided for in Section 31(1) of the Code for approval of resolution plan are therefore: - (a) The Resolution Plan is approved by the CoC under Section 30(4) of the Code; (b) The Resolution Plan so approved meets the requirements as referred to in Section 30(2) of the Code; (c) The Resolution Plan has provisions for its effective implementation. The satisfaction of the conditions is discussed below. 25. It is submitted by the RP that the resolution plan has been approved by a vote of 71.67% of voting share of the financial creditor and therefore, the conditions provided for by Section 30(4) of the Code are satisfied. 26. The provisions of Section 30(2) of the Code are as follows: - 30 (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 debts of operational creditors in such man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara No.9 of Form H (supra). The same is being further examined as under: - Section 30(2)(a): The resolution plan (page 72 of the Dy. No.232/4 dt.17.09.2020) states that payment of insolvency resolution process cost shall be the paid in full towards final payment of the insolvency resolution process costs payable. Further, it is stated that the IRP Costs shall be paid by the Corporate Debtor in priority to any other creditors of the Corporate Debtor in accordance with the Code and the Corporate Debtor (or the Resolution Applicant, as the case may be) shall pay the IRP Costs to the relevant Persons as per the details (including the names, amounts payable to and bank account details of such Persons) provided by the Resolution Professional to the Corporate Debtor in writing at least 7 Business Days prior to the due date of IRP Costs. The plan proposes two repayment options to the financial creditors namely, upfront repayment option and restructured repayment option, the details of which are mentioned in Clause 4 Part II of the plan. Upon payment of the IRP Costs, the Interim Finance Facility Agreement and all terms and conditions contained therein stand terminated and the Corporate D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.07 63.32 72.38 71.6663% of Rs.101 Cr. (Rs.72,38,29,630) Total amount 12.65 88 .35 101 12.65** 9 0.90 103.55 It is further submitted that the contention with regard to priority in payment to the dissenting financial creditors over other financial creditors is not tenable since the amendments are subsequent to the approval of the plan. The Hon'ble Supreme Court of India in Rahul Jain vs. Rave Scans Pvt. Ltd. & others - CA No. 7940 of 2019 dated 08.11.2019, while dealing with Regulation 38(1)(c) and in the identical circumstances observed as under:- "Given that the resolution process began well before the amended regulation came into force and the resolution plan was prepared and approved before that event, the wide observations of the NCLAT, requiring the appellant to match the pay out (offered to other financial creditors) to Hero was not justified." In this view of the matter the contention made on behalf of the dissenting financial creditors is rejected. Section 30(2)(c)(d) & (e): In Part II, Clause 4 of the resolution plan (Pg. 67 of Dy. No. 232/4), it is stated that pursuant to the approval of the plan, a Monitoring Committee comprisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the corporate debtor as CIRP costs during the CIRP of the corporate debtor. Therefore, the dues amounting to Rs.2.3 crores payable by Orbit Lifesciences Private Limited should be utilised towards CIRP costs. It is further submitted that in case the above stated amount of Rs.2.3 crore is not utilised towards CIRP costs, the same may be considered to be distributed in the manner and in the order of priority as provided under Section 53 of the Code, which deals with distribution of proceeds from the sale of assets in the event of liquidation of the corporate debtor. 30. During the course of hearing on 17.10.2019, the learned Senior Counsel appearing for the resolution applicant submitted that they have no objection, if the amount payable by the Orbit Lifescience Private Limited is shared among the financial creditors and that they will not have any claim over the same. The statement of the learned Senior Counsel for the resolution applicant was taken on record. Also JMFARC Limited-financial creditor with 71.6% voting share in the CoC submitted that they have no objection, if the resolution plan is approved by this Tribunal. 31. In compliance of order dt.14.11.2019, the RP filed co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al., the Adjudicating Authority (NCLT) or for that matter the appellate authority (NCLAT), to reverse the "commercial decision" of the CoC. It was also held that from the legislative history there is contra indication that the commercial or business decisions of the financial creditors are not open to any judicial review by the adjudicating authority or the appellate authority. The said decision was also recently affirmed by the Hon'ble Supreme Court in the matter of Committee of Creditors of Essar Steel India Limited vs Satish Kumar Gupta & Ors. (Civil Appeal No. 8766-67/2019). Further it has been submitted that the issue pertaining to liquidation value is Res Integra and has been settled by the Apex Court in the case of Maharashtra Seamless Limited vs. Padmanabhan Venkatesh & Ors. on 22.01.2020, (2006) 6 SCC 298 (para 25-28 of the said order). 34. SIDBI in its reply (Dy.251/9 dt.17.11.2020) has submitted that it had filed a detailed complaint with IBBI under regulation 3(3) of Grievance and Complaint Handling Procedure Regulation, 2017 and also before the Institute of Insolvency Professionals of ICAI (IIIPI) under section 204 (f) of the code regarding the irregularities committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve. The terms of the plan and its implementation schedule is stated to be four years from the approval of the plan by the Adjudicating Authority. 38. As per Regulation 39(4) of the regulations, the resolution applicant has furnished performance security in the form of bank guarantee of amount Rs.25cr. dated 02.11.2020 which is valid till 30.11.2021. Copy of the Bank Guarantee is at Annexure -2 (Dy. No.2321/13 dt.24.11.2020) 39. In part 15 of Form H supra, it is stated that 4 applications have been filed with the NCLT under Section 43, 45, 50 and 66 of the Code regarding preferential, undervalued, extortionate credit transaction and fraudulent transaction. The relevant applications are under hearing by the Tribunal. 40. We have discussed above that the requirements under Section 31(1) of the Code are satisfied in the present case. In para No.4 of Form H (supra) the RP has certified that the resolution plan complies with all the provisions of the Code and Regulations and does not contravene any of the provisions of the law for the time being in force. The RP has also certified that the resolution applicant namely Akums Drugs & Pharmaceuticals Ltd. has submitted affidavit pursuant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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