TMI Blog2022 (6) TMI 1326X X X X Extracts X X X X X X X X Extracts X X X X ..... to have effect. Application allowed. - l.A. No.132 of 2020 in CP (IB) No.228/BB/2018 - - - Dated:- 24-6-2022 - Hon ble Shri Ajay Kumar Vatsavayi, Member (Judicial) and Hon ble Shri Manoj Kumar Dubey, Member (Technical) For the R.P. Shri A. Murali, Adv. For Canara Bank : Ms. Chitra Nirmala, Adv. ORDER Per: Ajay Kumar Vatsavayi, Member (J) 1. This Application has been filed by Shri Shivadutt Bannanje (hereinafter referred to as Applicant / Resolution Professional ) under Sectior 30(6) and Section 31 of the Insolvency and Bankntptcy Code, 2016 ( IBC/Code ) seeking approval of the Resolution Plan submitted by Starteck Finance Limited for the revival of the Corporate Debtor, which is annexed and marked as Annexure-26 to the Application. 2. Brief facts of the case are given hereunder: (a) The main Company Petition bearing CP (IB) No.228/BB/ 2018 filed by the Operational Creditor i.e. Indu Corporation Private Limited u/s 9 of the Code for initiation of the Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor, namely, M/s. Bhuwalka. Steel Industries Limited, was admitted by this Adjudicating Authority, vide order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n with the Tribunal seeking extension of CIRP period by a further period of 90 days with effect from 04.10.2019. Further, the Evaluation Matrix placed before the Committee was also approved along with the re-constitution of the Committee which is as follows: Sr. No. Name of the Financial Creditor Voting Percentage 1. Canara Bank 65.80% 2. IDBI Bank 29.95% 3. SBI Global Factors Limited 4.25% (g) The Adjudicating Authority, vide order dated 20.09.2019, extended the CIRP for further period of 90 days from 04.10.20 19. The time limit for submission of the Resolution Plan was also extended till 04. 10.2019 and thereafter till 22.10.2019. (h) The two Valuers appointed as per Regulation 27 determined the fair value and the liquidation value for the Corporate Debtor under Regulation 35 of the CIRP Regulations. The average liquidation value of the Corporate Debtor as arrived at by the registered Valuers is Rs.91.25 Crores arid the fair market value is Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 31.12.2019, excluded a period of fifty seven (57) days i.e. from 06.11.2019 to 02.01.2020 from C1RP Period. Subsequently, the Hon ble High Court of Karnataka, vide order dated 03.01.2020, had directed the RP to accept the Resolution Plan submitted by GK Ispat Pvt. Ltd. and Bipin Textile Processing Industries Ltd. (m) During the CoC meeting held on 17.01.2020, the Committee was re constituted as follows: Sr. No. Name of the Financial Creditor Voting Percentage 1. Canara Bank 65.01% 2. IDBI Bank 29.59% 3. SBI Global Factors Limited 4.20% 4. Indian Overseas Bank 0.17% 5. Deccan Mining 1.03% Further, in the said meeting, the RP placed three Resolution Plans received from M/s. PP Metallix, M/s. Starteck Finance Ltd. and M/s. Bipin Textiles Processing Industries Pvt. Ltd. for revival of the Corporate Debtor. All the three Resolution Plans were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Hon ble High Court. (q) A meeting of the CoC with the three Resolution Applicants took place on 17.02.2020 and also subsequently called for on 18.02.2020. However, on 18.02.2020, the representative of PP Metallix sent an email reiterating the earlier contentions. The Committee vide email has inter alia informed the Resolution Applicant that conditional payment to the operational creditors are not acceptable and accordingly they are requested to remove the conditions for payment of operational creditors or alternatively the Committee will not consider the conditional payment to the operational creditors. (r) Accordingly, at the meeting of the CoC held on 18.02.2020, the Highest (H1) and the second highest (H2) Resolution Applicants i.e. Starteck Finance Ltd. and Bipin Textile Processing Industries Pvt. Ltd. respectively were declared after due deliberations on the Evaluation Matrix. After various rounds of negotiations and discussions, Starteck Finance Limited was declared as the Highest Resolution Applicant. The final proposal submitted by H 1 and H2 is as follows: Amount (Rs. in Crores) Payment Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to implement, or contributed to the failure to implement, any other resolution plan approved by the Adjudicating Authority. (x) It view of the above, the RP filed the instant application seeking approval of the Resolution Plan submitted by Starteck Finance Limited for revival of the Corporate Debtor. 3. Heard Shri Shivadutt Bannanje, learned Resolution Professional, Shri A. Murali, learned Counsel for the Applicant/Resolution Professional, Ms. Chitra Nirmala, learned Counsel for the Canara Bank and carefully perused the pleadings on record. 4. The Corporate Debtor herein, namely, M/ s. Bhuwalka Steel Industries Limited was incorporated on 18.08.1981 and the CIRP proceedings were initiated against the Corporate Debtor by this Adjudicating Authority, vide order dated 08.042019 passed in C.P. (IB) No.228/BB./2018. The present application is filed for approval of the Resolution Plan submitted by M/s.Starteck Finance Limited ( Resolution Applicant ). The approval has been sought under the provisions of Section 31(1) of the Code. 5. In pursuant to the public announcement inviting claims from the Creditors of the Corporate Debtor, the IRP had constituted the Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in Section 31(1) of the 1 B Code, 2016 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. 10. It is submitted by the RP that, the CoC in its Meeting held on 18.02.2020 has approved the Resolution Plan dated 18.02.2020 submitted by M/s. Starteck Finance Limited with 98.97% of voting shares and therefore, the conditions provided for by Section 30(4) of the Code are satisfied. 11. The provisions of Section 30(2) of the I B Code, 2016 are as follows: 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 3 [payment] of other debts of the corporate debtor; (b) provides for the payment of debts of operational creditors in such manner as may be specified by the Board which s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be adjusted against the upfront amount payable to the Financial Creditors. Further, the unpaid Insolvency Resolution Process costs shall be paid in priority to payment of other debts of the Corporate Debtor. The amounts payable Section 30(2)(b): As regards the payment of debt of the Operational Creditors, the Resolution Plan at Page Nos.305 and 318 of the Application inter alia stated that the Information Memorandum provides that the total admitted claims of the Trade Creditors amount to Rs. 198.84 Crores. The Resolution Applicant proposes to make payment to the Trade Creditors as per their entitlement in terms of Section 30(2)(b) of the Code r/w Regulation 38(1) of the CIRP Regulations in settlement of all Claims of the Trade Creditors against the Corporate Debtor till the Effective Date in accordance with the Resolution Plan. The amounts due to the Trade Creditors under the Resolution Plan shall be given priority of payment over Finan al Creditors. It is further stated that the amounts payable to the Operational Creditors under this Resolution Plan, including Workmen and Employee Dues amount, shall be paid in priority to payments to the Financial Creditors in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons outside the ordinary course of business and ensure that the existing management, directors, company secretary and other personnel of the Corporate Debtor shall extend full cooperation and support in implementation of this Resolution Plan, including for making all relevant filings under Applicable Law. Section 30(2)(e): As regards whether the Resolution Plan contravenes any of the provisions of the law for the time being in force, it is declared in Page No.335 of the Application that the Resolution Applicant confirms that this Plan is not in contravention of the provisions of any of the Applicable Laws. Section 30(2)(f): It is stated by the Resolution Professional in Form-H at para 3 that he has examined the Resolution Plan dated 18.02.2020 received from the Resolution Applicant i.e, M/s. Starteck Finance Limited and approved by CoC of the Corporate Debtor. He further certified at para 4 of Form-H that the said Resolution Plan complies with all the provisions of the Code, the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and does not contravene any of the provisions of the law for the time being in force and that the said Resolution Appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Resolution Plan has been approved by the CoC with 98.97% voting share in accordance with the provisions of the Code and CIRP Regulations made thereunder and after considering its feasibility and viability and other requirements specified by the CIRP Regulations. 16. Pursuant to Regulation 38(3)(a) of the CIRP Regulations regarding whether the Resolution Plan demonstrates that it addresses the cause of default, it is inter alia stated in Section IV of the Resolution Plan (Page No.301 of the Application) that the major reason for the default by the Corporate Debtor was on account of primarily poor working capital management and inability to source raw material efficiently. Also, due to its fund crunch and inability to tie-up with a financial strong partner, the real estate potential of the Hoskote site could not be developed and also the necessary investment towards overhauling of infrastructure had not been undertaken. By virtue of its financial strength, Starteck Finance Limited (formerly known as Nivedita Mercantile and Financing Limited) is best poised to turnaround the Corporate Debtor. The net worth of the Resolution Applicant (Page No.300 of the Applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the necessary investment towards overhauling of infrastructure had not been undertaken. Also, in terms of value chain, it is critical that any manufacturer captures as much of the value chain as possible. Unfortunately, the Corporate Debtor was not able to have hot-charging of its raw materials. Hence, they were not able to capture the additional margin from scrap/sponge to billet stage as well as all the associated cost-savings on account of hot-charging. By virtue of its financial Strength, Starteck Finance Limited is best poised to turnaround the Corporate Debtor. Further, the net worth of the Company is Rs. 109 Crores. 21. Pursuant to the directions given by this Tribunal on 10.03.2022, the Applicant/RP vide Diary No.1133 dated 21.03.2022 has filed an Affidavit enclosing a copy of the Information Memorandum, Request for Resolution Plan (RFRP) and Bank Guarantee provided by the Successful Resolution Applicant i.e., Starteck Finance Limited and the same is taken on record. 22. According to Regulation 39(4) of the CIRP Regulations, the Resolution Applicant shall furnish evidence of receipt of performance security as required under sub-regulation (4A) of Regulation 36B which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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