2018 (6) TMI 1617 - Tri - Insolvency and Bankruptcy

Tribunal approves resolution plan, lifts moratorium, instructs professional to transfer records

In Re : Wig Associates Pvt. Ltd.

The Tribunal approved the resolution plan submitted by the resolution applicant, subject to specified qualifications and directions. The moratorium order ... Approval of the resolution plan - CIRP - Whether the resolution applicant, the only “resolution applicant” is not debarred or disqualified by the amended provisions of section 29A of the Insolvency and Bankruptcy, Code, 2016 ('I & B Code/'Code') - merits or demerits of the resolution plan to record the “satisfaction” prescribed under the statute - HELD THAT:- Final conclusion drawn is that although it is informed that there was no claim received from Sales Tax Department but a duty is hereby casted on the resolution applicant and the management of the corporate debtor to get the Sales Tax dues resolved with the concerned authorities. Likewise, the; resolution applicant shall be responsible to discharge the Income-tax dues payable earliest possible by fully cooperating with the Tax Authorities in getting the dispute resolved within six months' period for the date of this order. It is hereby specifically observed that the 5 per cent limit to settle the dues of operational creditors is not approved. It is suo motu envisaged by the resolution applicant that all the operational creditors as outstanding in the books of account of WAPL as on the cut-off date shall be paid even though no claims have been received. The payment schedule affirmed That in the resolution plan it is stated that although in one of the Regulation it is provided that only liquidation value is to be considered for payment to operational creditor within 30 days, in priority to financial creditors, but the resolution applicant provides for repayment of dues to the operational creditors more than the liquidated value. Considering the undertaking of the resolution applicant, it is hereby directed that the payment to the operational creditors be made as agreed upon, which may exceed the liquidated value, within the time schedule as described in the resolution plan. The resolution applicant has also explained the means of finance to meet the costs of the resolution plan That through an affidavit the resolution applicant has affirmed that a sum of ₹ 103 lakh has also been paid to BoB towards OTS proposal and affirmed to make the balance payment as per the resolution plan. Subject to the qualifications made hereinabove in the resolution plan and the corresponding directions pronounced, this Bench record its satisfaction for granting approval to the resolution plan. Henceforth the moratorium order shall cease to have effect. The resolution professional shall further act upon as prescribed, on approval of the resolution plan to forward the records, to the concerned authorities and to intimate the closure of the insolvency proceedings. Resultantly the case-file is now required to be consigned to records. Issues Involved:1. Approval of the resolution plan submitted by the resolution applicant.2. Eligibility of the resolution applicant under Section 29A of the Insolvency and Bankruptcy Code (IBC), 2016.3. Examination of the resolution plan's compliance with statutory requirements.4. Satisfaction of the Adjudicating Authority (AA) with the resolution plan.5. Payment and settlement of financial and operational creditors.6. Management and implementation of the resolution plan.Issue-wise Detailed Analysis:1. Approval of the Resolution Plan:The application was submitted on 8th May 2018, seeking permission to approve the resolution plan by Mr. Mahendra Wig, the sole resolution applicant. The petition was initially filed on 19th July 2017 under Section 10 of the IBC by Wig Associates (P.) Ltd. to initiate corporate insolvency resolution process (CIRP) against itself for an admitted debt of Rs. 4,85,14,000 to Bank of Baroda. The petition was admitted on 24th August 2017, and a moratorium was commenced with the appointment of Mr. S.K. Gofa as the interim resolution professional.2. Eligibility of the Resolution Applicant under Section 29A:The primary legal question was whether Mr. Mahendra Wig, related to the promoter directors of the corporate debtor, could submit a resolution plan post the introduction of Section 29A of the IBC. Section 29A, introduced via an Ordinance on 23rd November 2017 and later formalized as the Insolvency and Bankruptcy Code (Amendment) Act, 2017, disqualifies 'connected persons' from submitting a resolution plan. Mr. Wig was found to fall under this category. However, the Tribunal concluded that the amended Section 29A was effective from 23rd November 2017, and since the CIRP commenced before this date, the resolution plan was deemed eligible under the old provisions.3. Examination of the Resolution Plan's Compliance with Statutory Requirements:The resolution professional submitted valuation reports with an average liquidation value of Rs. 87.60 lakh against a financial creditor claim of Rs. 1,067.39 lakh. The resolution plan was approved by the Committee of Creditors (CoC) with a 100% vote. The plan included a 'One Time Settlement' (OTS) offer of Rs. 355 lakh against the principal debt of Rs. 460.16 lakh, approved by Bank of Baroda on 27th March 2018. The plan also included provisions for payment of insolvency resolution process costs, repayment of operational creditors, management of corporate debtor affairs, and implementation and supervision of the resolution plan.4. Satisfaction of the Adjudicating Authority (AA) with the Resolution Plan:The AA examined the resolution plan under Sections 30 and 31 of the IBC, emphasizing the need for recording 'satisfaction' in writing. The AA's satisfaction is based on a thorough study of the resolution plan, including both objective and subjective analysis, ensuring the plan's alignment with the IBC's objective to revive financially stressed corporate bodies.5. Payment and Settlement of Financial and Operational Creditors:The resolution plan proposed a payment schedule for financial creditors with a total settlement amount of Rs. 355 lakh, including adjustments and interest. For operational creditors, the plan proposed a settlement at 5% of their dues, although the liquidation value available for operational creditors was nil. The AA directed that the payment to operational creditors should exceed the liquidated value within the agreed schedule.6. Management and Implementation of the Resolution Plan:The resolution applicant proposed to take over the management and control of the corporate debtor during the term of the resolution plan, which was set for one year. The resolution professional was appointed as the monitoring agency for the supervision and implementation of the plan. The applicant affirmed the infusion of Rs. 326.50 lakh into the corporate debtor, with funds sourced from family members and personal property liquidation.Conclusion:The Tribunal approved the resolution plan subject to the qualifications and directions mentioned. The moratorium order ceased to have effect, and the resolution professional was directed to forward records to concerned authorities and intimate the closure of insolvency proceedings.