2018 (4) TMI 1594 - Tri - Companies Law

Tribunal Approves Vedanta's Plan for Electro Steels Ltd under Insolvency Code

The Tribunal approved Vedanta Limited's resolution plan for Electro Steels Limited, finding it compliant with the Insolvency and Bankruptcy Code and ... Corporate insolvency process - approval of a Resolution Plan - resolution applicant eligiblity to submit the Resolution Plan - Held that:- To prove that Konkola Copper Mines (KCM) is the connected person of Vedanta Limited, the applicant produced Annual Reports of Vedanta Resources Plc as Annexure A-7 along with the refereed application. So also the applicant produced proof to prove that KCM is a convict under various provisions of Environmental Protection and Pollution Control Act in force in Zambia. The applicant already establishes that KCM is the subsidiary of Vedanta Resources Plc and that Vedanta Ltd. is the subsidiary of Vedanta Resources Plc. Therefore, whether the KCM is the subsidiary of Vedanta Limited with in the meaning of Section 29A (j) doesn't arise again in the case in hand. No doubt, the KCM is a subsidiary Company of Vedanta Resources Plc and that Vedanta Limited is the subsidiary of Vedanta Resources Plc. That being so, if KCM is found convicted for any offence punishable for imprisonment for 2 years or more as provided under Section 29A (d), the Vedanta Limited who is the Resolution applicant, in this case, is ineligible. Bare in mind the legislative object of introduction of Section 29(A) to the Code and the object of the enactment of the Code and upon the above said reasons in our considered opinion, the resolution applicant Vedanta Limited cannot be said to be ineligible to submit the Resolution Plan. Accordingly we answer the point in negative and hold that Vedanta Limited is eligible resolution applicant. On a perusal of the report what we understood is that the COC accepted the reasoning of the Resolution Professional and the opinion of the advisors of the Resolution Professional and upholding the reasoning of the Resolution Professional and hold that Vedanta Limited is eligible as per section 29A of the Code. However, the Ld.Sr.CounseI for the Vedanta Limited submits that in addition to the reasoning of resolution professional the COC sought opinion from law firms on the point and ultimately decided that Vedanta Limited does not suffer from any disqualification as the resolution applicant in terms of Section 29A (d) of the Code. The reasons from deviating the direction of the Bench as highlighted above though not inspire our confidence we are not inclined to reject the resolution plan since it otherwise meets all the requirements mandated by the provisions of the Code and Regulations. This point is answered accordingly. The resolution plan meets all the requirements to be complied under the provisions of the code and Regulation. The resolution applicant is Vedanta Limited is a Public Company and is the subsidiary of Vedanta Resources Plc. It claimed that it is the 6th largest diversified natural resources company in the world by EBITDA and the only global player with significant operations, expertise and majority sales in the Indian market. It also experienced in iron ore mining and pig iron manufacturing more than 15 years. The technical and economical viability of the resolution applicant in taking over the company not at all in challenge from any corner. On going through the plan we are also satisfied that the resolution applicant has taken into account the interest of all stakeholders and that the applicant have had necessary infrastructures that will enable the applicant to continue the corporate debtor company as a going concern. So we are satisfied that the corporate debtor is in a safer hand. Application allowed by approving the Resolution Plan of Corporate Debtor Electro Steels Limited, which is approved by the of COC with a voting share of 100% under section 31 (1) of the Insolvency & Bankruptcy Code, 2016, which will be binding on the Corporate Debtor, its employees, members, creditors, coordinators and other stakeholders involved in the Resolution Plan. The approved Resolution Plan shall come into force with immediate Issues Involved:1. Eligibility of Vedanta Limited as a Resolution Applicant under Section 29A of the Insolvency and Bankruptcy Code (IBC).2. Compliance of the Committee of Creditors (COC) with the directions of the Adjudicating Authority.3. Admission of the entire claim of the operational creditor, SRG Earth Resources Pvt. Ltd., by the Resolution Professional.Issue-wise Detailed Analysis:Point No (i): Eligibility of Vedanta Limited as a Resolution ApplicantThe objection raised by Renaissance Steel India Private Limited (RSIPL) contended that Vedanta Limited was ineligible under Section 29A(d) of the IBC due to its connection with Konkola Copper Mines Pvt. Ltd. (KCM), which had been convicted by a Zambian court. The Tribunal examined whether KCM, being a subsidiary of Vedanta Resources Plc (the holding company of Vedanta Limited), was a 'connected person' under Section 29A(j) of the IBC. The Tribunal noted that a company is considered a 'person' under Section 3(23) of the IBC, and KCM's conviction for an offence punishable with imprisonment or fine did not render Vedanta Limited ineligible. The Tribunal referred to the Supreme Court's judgment in Standard Chartered Bank & Ors. Vs. Director of Enforcement and Ors., which clarified that a company can be punished with a fine in lieu of imprisonment. Therefore, the Tribunal concluded that Vedanta Limited was not disqualified under Section 29A(d) and was eligible to be a resolution applicant.Point No (ii): Compliance of the COC with the Directions of the Adjudicating AuthorityRSIPL argued that the COC had disregarded the Tribunal's earlier order directing independent consideration of Vedanta Limited's eligibility. The Tribunal acknowledged that the COC had deviated from the Tribunal's directions by concluding that KCM was not a 'connected person' despite the Tribunal's finding to the contrary. However, the Tribunal found that the resolution plan met all the requirements of the IBC and the Regulations. Despite the COC's deviation, the Tribunal did not reject the resolution plan, as it otherwise complied with the legal provisions.Point No (iii): Admission of the Entire Claim of SRG Earth Resources Pvt. Ltd.SRG Earth Resources Pvt. Ltd., an operational creditor, contended that the Resolution Professional did not admit its entire claim. The Tribunal noted that the Resolution Professional had admitted a portion of the claim based on the audit report and reconciliation of the debit note with the corporate debtor's books and ledgers. The Tribunal found that the Resolution Professional's actions were in compliance with the IBC and the Regulations. Additionally, the Tribunal observed that the liquidation value of the corporate debtor was significantly lower than the total admitted financial debt, resulting in no liquidation value due to the operational creditors. Consequently, the Tribunal dismissed the application of SRG Earth Resources Pvt. Ltd.Conclusion:The Tribunal approved the resolution plan of Vedanta Limited for Electro Steels Limited, as it met all the requirements of the IBC and the Regulations. The objections raised by RSIPL and SRG Earth Resources Pvt. Ltd. were dismissed. The resolution plan, approved by the COC with a 100% voting share, was binding on all stakeholders involved. The moratorium order ceased to have effect, and the Resolution Professional was directed to forward all records to the Insolvency and Bankruptcy Board of India.Order:1. CA(IB) No.277/KB/2018 is allowed, approving the Resolution Plan of Vedanta Limited.2. The approved Resolution Plan shall come into force immediately.3. The moratorium order passed under Section 14 shall cease to have effect.4. The Resolution Professional shall forward all records to the Insolvency and Bankruptcy Board of India.5. CA(IB) No.271/KB/2018 and CA(IB) No.281/KB/2018 are dismissed.6. CP(IB) No.361/KB/2018 is disposed of as above.