2019 (10) TMI 58 - Tri - Insolvency and Bankruptcy

Tribunal Approves Resolution Plan, Dismisses Creditor Objections

M/s. Sri Srivathsa Paper Mills Private Limited And M/s. Arumugam Arumugam Versus Committee of Creditors And M/s. Hi Tech Bio Products

M/s. Sri Srivathsa Paper Mills Private Limited And M/s. Arumugam Arumugam Versus Committee of Creditors And M/s. Hi Tech Bio Products - TMI Issues Involved:1. Objections by operational creditor Arjun Chemicals Private Limited.2. Objections by the State Tax Officer, Tamil Nadu.3. Objections by TANGEDCO.4. Objections by ESI Corporation.5. Objections by the Income Tax Officer, Coimbatore.Detailed Analysis:I. Objections by operational creditor Arjun Chemicals Private Limited:(i) The operational creditor objected to the incomplete and unsigned draft 'Corporate Insolvency Resolution Plan' provided by the Resolution Professional, which did not reveal the name of the Resolution Applicant, violating the dictum in Binani Industries Ltd. v. Bank of Baroda.(ii) The creditor also objected to the proposed payment of Rs. 2,55,290/- out of the admitted claim of Rs. 19,63,772/-, and the clause requiring withdrawal of all legal proceedings against the Corporate Debtor, citing discrimination and referencing the Prasad Gempex v. Star Agro Marine Exports (P.) Ltd case.(iii) The Resolution Applicant and suspended directors countered that the operational creditor's entitlement without adopting the haircut method was unsustainable, as the operational creditor would receive 13% as opposed to 7.8% based on liquidation value. The Tribunal found the objections devoid of merits and rejected them, emphasizing the need to avoid further litigation post-approval of the resolution plan to ensure the revival of the business.II. Objections by the State Tax Officer, Tamil Nadu:(i) The State Tax Officer objected to the approved sum of Rs. 2,89,080/- out of a total claim of Rs. 30,47,372/-, arguing that the haircut contravened the TNVAT Act, 2006.(ii) The officer also reserved the right to file a claim for Rs. 11,09,95,646/- if the Resolution Plan failed, requesting modification of the plan to repay the entire amount due under the TNVAT Act.(iii) The Resolution Professional and suspended directors argued that the claim was considered with a similar haircut method and that the additional claim of Rs. 11,09,95,646/- was fictitious and time-barred. The Tribunal found the objections flawed and time-barred, rejecting them.III. Objections by TANGEDCO:(i) TANGEDCO initially claimed current consumption charges of Rs. 82,32,871/- and a security deposit of Rs. 80,32,790/-.(ii) They later adjusted the charges against the deposit, showing a new balance of Rs. 2,49,412/-.(iii) TANGEDCO contended that the adjustment was not considered by the IRP, requesting a revision of the Resolution Plan.(iv) The Tribunal found TANGEDCO's contradictory stand and afterthought claims flawed, rejecting the objections and directing TANGEDCO to reconnect the power supply upon payment as per the Resolution Plan.IV. Objections by ESI Corporation:(i) ESI Corporation objected to the proposed payment of Rs. 2,66,319/- out of the claim of Rs. 20,48,611/-, citing priority over other debts under Section 94 of the ESI Act.(ii) The Resolution Applicant argued that the haircut method was lawful, referencing Supreme Court rulings in PR. CIT v. Monnet Ispat & Energy Ltd. and Innoventive Industries Ltd. v. ICICI Bank Ltd., which established that the IBC overrides other enactments.(iii) The Tribunal found the objections devoid of merits, rejecting them.V. Objections by the Income Tax Officer, Coimbatore:(i) The Income Tax Officer objected to the non-filing of returns by the Corporate Debtor for certain assessment years, arguing that losses cannot be carried forward as per Section 80 of the Income Tax Act.(ii) The Resolution Applicant contended that returns could be filed with condonation of delay, and the carry forward of losses was crucial for the revival of the industry.(iii) The Tribunal directed the Resolution Applicant to seek permission to file returns for the relevant years, referencing the Supreme Court ruling in Monnet Ispat & Energy Ltd.’s case, and rejected the objections.Approval of the Resolution Plan:The Tribunal examined the 'Resolution Plan' approved by the CoC, noting compliance with Section 30(2) of the IBC and relevant regulations. The plan proposed a total infusion of Rs. 21,66,00,000/- for settling creditors and revamping the Corporate Debtor. The Tribunal approved the plan, binding on all stakeholders, and directed the Resolution Applicant to obtain necessary approvals within a year. The moratorium ceased, and the Resolution Professional was instructed to forward all records to the IBBI. The approved plan became effective immediately, and the order was pronounced in open court.