2019 (2) TMI 215 - Tri - Insolvency and Bankruptcy

Approval of SREI's Final Resolution Plan; RP's Actions Upheld; Proceedings Concluded

Kitply Industries Ltd. Versus IDBI Bank Limited

The Final Resolution Plan submitted by SREI Multiple Asset Investment Trust (Vision India Fund) was approved by the Adjudicating Authority. The plan ... Initiating Corporate Insolvency Resolution Process against the Corporate Debtor - constitution of CoC - it was alleged that RP falls to perform his statutory duties to collect information as to whether any or more members of the CoC is/are party /parties related to the CD - Held that:- The Code has certainly cast an obligation on the RP to ascertain if any member(s) of the CoC is/are related to the CD. He is also expected to do necessary investigation in this regard. However, such a duty cannot be stretched to such absurd limits requiring the learned RP to make investigation against each and every suspicion which may crop up while constituting the CoC regardless of whether or not such suspicion has any basis. None of the members of the CoC raised any query as to the constitution of CoC since the constitution of CoC on 29.05.2018 till the fag end of September, 2018. Only on 27-09-2018, after a gap of almost five months from the date of initiation of CIRP, the applicant (IDBI Bank) raised such contention. I have found that the applicant at first wanted information as to the KYCs of the promoters of the CD as well as information about the mortgagors. I have found that some of the information so sought for was furnished while inability was expressed in regard to furnishing of other information vide email dated 29-09-2018 from RP addressed to the applicant - The information, so furnished by the learned RP, is found to be incomplete. Also, the conduct of the applicant during the course of CIRP is also found far from satisfactory. There are indisputable materials on record to show that the applicant had also kept on asking the learned RP to furnish it with some information viz. liquidation value of the CD, and that too, at a stage, when law forbids the RP from sharing such information with anyone. Such conduct on the part of the applicant again shows that some considerations, other than valid one, might have driven the applicant to keep on hurling queries after queries on the RP in regard to allegation that one of the members of the CoC is a related party to the CD - the RP cannot be adjudged guilty of non-performing of his statutory duty qua constitution of CoC only because of the non-furnishing of the KYCs of the promoters of the CD. Rejection of Resolution Plan, submitted by the SMAIT, for the RP's violating the mandate of law in the form of Section 29(A)(c) of the Code of 2016 - Held that:- Such contention too is without any basis since the Resolution applicant is a AIF, registered with SEBI, which is exempted from the prohibition in Section 29(A)(c) of the Code of 2016 in view of law laid down in Explanation (e) to sub-clause (f) section 29A(c) of the Code. The Final Resolution Plan is in conformity with the provisions of Section 30 (2) of the IBC, 2016 and the same is approved. Issues Involved:1. Initiation of Corporate Insolvency Resolution Process (CIRP)2. Appointment of Interim Resolution Professional (IRP) and Resolution Professional (RP)3. Publication and extension of Expression of Interest (EoI) for Resolution Plan4. Submission and approval of Resolution Plan5. Allegations against the RP regarding statutory duties and related party issues6. Preferential treatment to certain creditors7. Compliance with Section 29A(c) of the Insolvency and Bankruptcy Code, 2016 (IBC 2016)8. Final approval of the Resolution Plan by the Adjudicating AuthorityDetailed Analysis:1. Initiation of Corporate Insolvency Resolution Process (CIRP):IDBI Bank Limited, a Financial Creditor, filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC 2016) to initiate CIRP against the Corporate Debtor. The application was admitted, a moratorium was declared, and Mr. Bijay Murmuria was appointed as the Interim Resolution Professional (IRP).2. Appointment of Interim Resolution Professional (IRP) and Resolution Professional (RP):In the first Committee of Creditors (CoC) meeting, Mr. Bijay Murmuria was confirmed as the Resolution Professional (RP). The RP published invitations for Expression of Interest (EoI) for submission of a Resolution Plan.3. Publication and Extension of Expression of Interest (EoI) for Resolution Plan:The RP published EoI in various newspapers with an initial submission deadline, which was extended due to no submissions. Eventually, three entities submitted EoIs, and the RP provided necessary documents to these applicants.4. Submission and Approval of Resolution Plan:The RP received only one Resolution Plan from SREI Multiple Asset Investment Trust (Vision India Fund). The plan was discussed and revised as per amendments in regulations. The CoC approved the plan with 92.74% votes in favor, while 7.26% voted against it.5. Allegations Against the RP Regarding Statutory Duties and Related Party Issues:IDBI Bank Limited alleged that the RP failed to discharge his statutory duties, specifically:- Not following the mandate in Section 21(2) regarding related parties in CoC.- Violating Section 29A(c) concerning eligibility of resolution applicants.- Granting preferential treatment to SREI Infrastructure Finance Limited.The RP countered these allegations, stating that the CoC's constitution was communicated early and no objections were raised until much later. The RP provided substantial information regarding the family tree of the Corporate Debtor's promoters, and the related party allegations were deemed unsubstantiated.6. Preferential Treatment to Certain Creditors:The contention was that the Code does not allow preferential treatment among secured creditors during CIRP. However, the RP and legal opinions supported the classification of creditors based on their charge on assets, which was found to be logical and not arbitrary.7. Compliance with Section 29A(c) of the Insolvency and Bankruptcy Code, 2016 (IBC 2016):IDBI Bank Limited argued that the Resolution Applicant was ineligible under Section 29A(c) due to involvement with a non-performing asset. The RP clarified that the Resolution Applicant, being an Alternative Investment Fund registered with SEBI, was exempt from this prohibition.8. Final Approval of the Resolution Plan by the Adjudicating Authority:The Adjudicating Authority examined the Final Resolution Plan and found it compliant with the requirements of Section 30(2) of IBC 2016. The plan was approved, and the moratorium ceased to have effect. All relevant parties were directed to cooperate with the implementation of the plan.The judgment concluded by approving the Final Resolution Plan submitted by SREI Multiple Asset Investment Trust (Vision India Fund), binding all stakeholders and directing compliance with the plan's terms. The proceedings were disposed of accordingly.