2019 (4) TMI 1797 - Tri - Insolvency and Bankruptcy

Osian India's Plan Approved for Aryavart Chemicals: Emphasis on IBC Compliance

The Adjudicating Authority (AA) approved the Resolution Plan submitted by Osian India for Aryavart Chemicals Private Limited, emphasizing adherence to ... Approval of Resolution plan - one of the justifications for approval of the Resolution Plan is that the Applicant wishes to run this business as a going concern and hence taken all measures viz. payments to employees salary/gratuity in full. HELD THAT:- The Procedure as prescribed under The Code is that a Resolution Plan is required to be submitted by a Resolution Application u/s. 30 of The Code. On approval, the Resolution Professional is to submit u/s. 30(6) the Resolution Plan, as approved by the Committee of Creditors, to the AA. Thereafter, u/s. 31, as reproduced supra, AA is to examine the contents of the Resolution Plan. The mandate of this section is that if the AA is 'satisfied' that the Resolution Plan as approved by the Committee of Creditors meets the requirement as referred to in Section 30(2), shall by an Order, approve the Resolution Plan. So the prerequisite is that recording of 'satisfaction' by AA is a condition precedent. A 'satisfaction' is to be recorded in writing in the Judgment approving the Resolution Plan. The Resolution Plan as approved by the Committee of Creditors is by and large hereby sanctioned by this Order in view of the recent judgment of the apex court in K Sashidhar v. Indian Overseas Bank [2019 (2) TMI 1618 - SUPREME COURT OF INDIA]. The Hon'ble Supreme Court in the said order has made clear that the role of CoC is quite vital for deciding the fate of the company It has been held that the Adjudicating authority is not required to go into the merits or reasoning of the decision taken by the CoC for approval or rejection of a resolution plan. The only benchmark which is set up to be determined by the AA is to see whether the plan has been approved by 75% voting of the CoC or not. Therefore, the commercial wisdom is not allowed to be interfered with. The approval of a Resolution Plan by the CoC is to be accepted in toto by the Adjudicating authority if a 75% voting share approves the said plan. Because of the latest decision, the scope of any suggestion or alteration in the impugned resolution plan is very limited. As far as the procedure is concerned, in this case, the same has been followed as per the provisions of the Insolvency Code, therefore, the Resolution Plan has to be approved. The Resolution Applicant has submitted an affidavit as required u/s. 30(1) of the Code stating that he is eligible u/s. 29A of the Code - The Resolution Plan is binding on the Corporate Debtor and other stakeholders involved so that revival of the Debtor Company shall come into force with immediate effect and the 'Moratorium' imposed under section 14 shall cease to have any effect henceforth. Issues Involved:1. Commencement of Corporate Insolvency Resolution Process (CIRP).2. Submission and Approval of Resolution Plans.3. Compliance with Insolvency and Bankruptcy Code (IBC) provisions.4. Role and Satisfaction of the Adjudicating Authority (AA).5. Implementation and Binding Nature of the Resolution Plan.Issue-Wise Detailed Analysis:1. Commencement of Corporate Insolvency Resolution Process (CIRP):The CIRP for Aryavart Chemicals Private Limited (Corporate Debtor) began on 19.03.2018 following the admission of a Section 9 application by an Operational Creditor, Panama Petrochem Ltd. Mr. Jitender Kumar Rambaran Yadav was appointed as the Interim Resolution Professional (IRP) and later confirmed as the Resolution Professional (RP) by the Committee of Creditors (CoC).2. Submission and Approval of Resolution Plans:- MA 1397/2018: A Resolution Applicant, Mr. Sandeep Mehta (Proprietor of Osian India), submitted a revised Resolution Plan on 28.08.2018, which was further revised on 05.10.2018 and 25.10.2018, improving the offer to Rs. 5,67,09,545/-. Despite revisions, the RP informed on 06.11.2018 that another entity's Resolution Plan had been approved, prompting Mr. Mehta to seek rejection of the other plan and acceptance of his final plan.- MA 1376/2018: Submitted by the RP on 05.03.2019, this application included the CoC-approved Revised Resolution Plan by Osian India, offering Rs. 6,10,61,280/- after several revisions and an Earnest Money Deposit (EMD) of Rs. 10,00,000/-.3. Compliance with Insolvency and Bankruptcy Code (IBC) Provisions:The RP filed a Supplementary Affidavit in MA 1376/2018, presenting the CoC-approved Resolution Plan of Osian India. The plan included detailed financial summaries, proposed payments, and strategies for addressing the company’s operational issues, such as outdated machinery, lack of maintenance, and financial restructuring. The plan emphasized the use of internal accruals and family net worth of over Rs. 25 crores to fund the resolution.4. Role and Satisfaction of the Adjudicating Authority (AA):The AA’s role is to ensure that the Resolution Plan meets the requirements of Section 30(2) of the IBC. The AA must record its 'satisfaction' in writing, based on a thorough examination of the plan, ensuring it aligns with the objectives of the IBC to revive financially stressed companies. The AA relies on the CoC’s commercial wisdom, as emphasized in the Supreme Court judgment in K Sashidhar v. Indian Overseas Bank, stating that the AA should not interfere with the CoC’s decision if the plan is approved by 75% voting share.5. Implementation and Binding Nature of the Resolution Plan:The approved Resolution Plan is binding on the Corporate Debtor and all stakeholders, ensuring the company’s revival. The 'Moratorium' under Section 14 ceases, and the incoming management is not liable for any past acts of the erstwhile management. The RP must submit records to the Insolvency & Bankruptcy Board of India and return them to the Resolution Applicant or New Promoters. The new management must comply with the Companies Act, 2013, and submit a copy of the order to the Registrar of Companies, Mumbai.Conclusion:The AA approved the CoC-sanctioned Resolution Plan, emphasizing the importance of CoC’s commercial wisdom and the necessity for AA to record satisfaction based on thorough analysis. The plan’s implementation is immediate, with provisions for addressing operational inefficiencies and financial restructuring, ensuring the company’s revival as a going concern.