2020 (9) TMI 1243 - Tri - Insolvency and Bankruptcy

Tribunal approves Resolution Plan for Kharkia Steels under Insolvency Code

The Tribunal approved the Resolution Plan submitted by Amritvani Exim Private Limited for M/s. Kharkia Steels Private Limited under the Insolvency and ... Approval of resolution plan under Section 31 - requirements of Section 30(2) - exclusion of lockdown period from CIRP timeline - compliance with Regulation 38 - compliance with Regulation 39(4) and Form H - binding effect of approved resolution plan - cessation of moratorium under Section 14Requirements of Section 30(2) - approval of resolution plan under Section 31 - The Resolution Plan submitted by M/s. Amritvani Exim Private Limited satisfies the requirements of Section 30(2) and is approvable under Section 31(1) of the Code. - HELD THAT: - The Tribunal recorded that the Committee of Creditors approved the Resolution Plan by a voting share of 82.75% and that the plan addressed interests of stakeholders, provided for payment to operational creditors, dealt with causes of default, was feasible and viable, contained provisions for effective implementation and supervision, and included arrangements for resolution process costs. Having considered these aspects, the Bench was satisfied that the plan met the statutory requirements under Section 30(2) and therefore approved the plan under Section 31(1). [Paras 8, 9, 10]Resolution Plan approved under Section 31; plan meets the requirements of Section 30(2).Compliance with Regulation 39(4) and Form H - compliance with Regulation 38 - The Resolution Applicant and Resolution Professional complied with Regulation 39(4) (Form H) and Regulation 38 requirements in relation to the resolution plan. - HELD THAT: - The Tribunal noted that a certificate in Form H as required by Regulation 39(4) was annexed with the resolution plan. It further recorded that under Regulation 38 the plan was considered to address interests of all stakeholders, make provision for operational creditors, be feasible and viable, and include mechanisms for management and supervision of implementation. These regulatory compliances supported the conclusion that the plan fulfilled the procedural and substantive regulatory requirements. [Paras 8]Regulation 39(4) (Form H) and Regulation 38 requirements are satisfied.Exclusion of lockdown period from CIRP timeline - The approval of the Resolution Plan falls within the permissible CIRP period after excluding the lockdown period as per the Central Government notification. - HELD THAT: - The Tribunal recorded the completion of the initial 180-day CIRP on 17.03.2020 and noted that the CoC had passed a resolution (87.9% votes) and the Tribunal had extended the CIRP for 90 days from 18.03.2020. The Bench observed that the nationwide lockdown period (from 25.03.2020) is to be excluded in computing the CIRP period pursuant to the Government notification dated 29th March, 2020. On that basis the approval by the CoC was held to be within the extended 270-day period. [Paras 7]Lockdown period excluded in computing CIRP timeline; approval is within permissible period.Binding effect of approved resolution plan - cessation of moratorium under Section 14 - The approved Resolution Plan is binding on the corporate debtor and all stakeholders; the moratorium under Section 14 ceases on implementation. - HELD THAT: - The Tribunal directed that the Resolution Plan approved under Section 31 shall be binding on the corporate debtor, its employees, members, secured and unsecured creditors, guarantors, and governmental authorities. It further directed that the moratorium order under Section 14 shall cease to have effect upon the plan coming into force. [Paras 10]Approved plan is binding on all stakeholders; moratorium under Section 14 ceases to have effect.Final Conclusion: The Tribunal approved the Resolution Plan of M/s. Amritvani Exim Private Limited under Section 31, having found compliance with Section 30(2), Regulations 38 and 39(4) (Form H), and that approval was within the permissible CIRP timeline after excluding the lockdown period; the approved plan is binding on all stakeholders and the moratorium under Section 14 shall cease. Issues: Approval of Resolution Plan under the Insolvency and Bankruptcy Code, 2016Detailed Analysis:1. Application for Approval of Resolution Plan: The Resolution Professional filed an application for approval of the Resolution Plan of M/s. Amritvani Exim Private Limited under Section 60(5) and Section 30 of the Insolvency and Bankruptcy Code, 2016. The plan had been approved by the Committee of Creditors with a significant voting share.2. Background and Initiation of CIRP: The Corporate Insolvency Resolution Process (CIRP) was initiated against M/s. Kharkia Steels Private Limited by M/s. Dena Bank (Now Bank of Baroda). Mr. Uday Narayan Mitra was appointed as the Interim Resolution Professional, later confirmed as the Resolution Professional. The CIRP commenced against the Corporate Debtor upon his appointment.3. Details of the Resolution Plan: The Resolution Plan submitted by Amritvani Exim Private Limited included an upfront payout to creditors, a second tranche funding for new plant and machinery, and provisions for reliefs and concessions to enable the Corporate Debtor's revival. The Resolution Professional submitted a revised plan due to increased costs, which was approved by the Committee of Creditors.4. Approval of Resolution Plan: The Committee of Creditors approved the Resolution Plan with a significant voting share. The Resolution Professional submitted the Fourth progress report for approval of the plan under Section 31(1) of the Code, but the hearing was delayed due to lockdown.5. Urgent Hearing and Compliance: The applicant's counsel requested an urgent hearing through video conference, emphasizing the need for approval to revive the non-operational Corporate Debtor. The Resolution Plan aimed at reviving the company in compliance with the Supreme Court's judgment in a relevant case.6. Extension of CIRP Period: An application was filed for an extension of the CIRP period, which was approved by the Committee of Creditors. The lockdown due to the Covid-19 pandemic did not count towards the CIRP period, ensuring the approval was within the stipulated time frame.7. Compliance with Regulations: The Resolution Professional provided a Certificate in Form H as per Regulation 39(4) and ensured compliance with Regulation 38, addressing stakeholder interests, payment priorities, causes of default, feasibility, and effective implementation mechanisms.8. Approval of Resolution Plan: The Tribunal approved the Resolution Plan as it met the requirements under Section 30(2) of the Code. The plan was found to fulfill the necessary criteria and was binding on all relevant parties as per Section 31 of the Insolvency and Bankruptcy Code, 2016.9. Final Directions and Disposal: The Tribunal issued specific directions for the approval and implementation of the Resolution Plan, including the cessation of the moratorium order, transfer of records to the Insolvency and Bankruptcy Board of India, and communication of the order to all concerned parties. The case was disposed of accordingly.This detailed analysis covers the key aspects of the judgment regarding the approval of the Resolution Plan under the Insolvency and Bankruptcy Code, 2016, providing a comprehensive overview of the issues involved and the Tribunal's decision.