2021 (4) TMI 577 - Tri - Insolvency and Bankruptcy

Approval of Resolution Plan for Sejal Glass Ltd under Insolvency Code

Edelweiss Asset Reconstruction Co. Ltd. Versus Sejal Glass Limited

Edelweiss Asset Reconstruction Co. Ltd. Versus Sejal Glass Limited - TMI Issues Involved:1. Approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016.2. Compliance with the Insolvency and Bankruptcy Code and related Regulations.3. Evaluation and approval process by the Committee of Creditors (CoC).4. Financial viability and funding sources of the Resolution Applicant.5. Adjudicating Authority's role and limitations in approving the Resolution Plan.Detailed Analysis:1. Approval of the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016:The Resolution Professional (RP) of Sejal Glass Limited sought approval for the Resolution Plan under Section 30(6) of the Insolvency and Bankruptcy Code, 2016, read with Regulation 39(4) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The RP submitted that the Plan had been approved by the Committee of Creditors (CoC) with a 73.15% voting share in favor.2. Compliance with the Insolvency and Bankruptcy Code and related Regulations:The RP confirmed that the Resolution Plan complied with Section 30(2) of the Code, which includes:- Payment of insolvency resolution process costs in priority to other debts.- Payment of debts of operational creditors in a manner specified by the Board.- Management of the affairs of the Corporate Debtor after approval of the Resolution Plan.- Implementation and supervision of the Resolution Plan.- No contravention of any provisions of the law for the time being in force.The RP also provided a Compliance Certificate in Form-H showing the compliance of the Plan as required under the Code and Regulations.3. Evaluation and approval process by the Committee of Creditors (CoC):The CoC evaluated the Resolution Plan submitted by Dilesh Roadlines Private Limited jointly with Mr. Surji D. Chheda & Ms. Chhaya S. Chheda. Despite initial concerns about the financial offer being less than the liquidation value, the CoC negotiated and approved the Plan with a 73.15% majority. The CoC's decision was based on their commercial wisdom, as emphasized by the Hon’ble Apex Court in various judgments.4. Financial viability and funding sources of the Resolution Applicant:The Resolution Applicant proposed to raise funds through the sale of Non-Core Assets of the Corporate Debtor and additional infusions. The RP clarified the sources of funds, including the net worth and non-current investments of the Resolution Applicant, which were found to be satisfactory. The Plan proposed to pay Rs. 30.07 crores out of the total Rs. 150.70 crores of debt, with a significant portion to be generated from asset sales.5. Adjudicating Authority's role and limitations in approving the Resolution Plan:The Adjudicating Authority's role is limited to ensuring that the Resolution Plan meets the requirements specified in Section 30(2) of the Code, as highlighted by the Hon’ble Apex Court in K Sashidhar v. Indian Overseas Bank and CoC of Essar Steel cases. The Authority cannot modify the Plan approved by the CoC in their commercial wisdom. The Resolution Plan was found to meet the necessary legal requirements and was not in contravention of any provisions of Section 29A of the Code.Conclusion:The Application IA No. 3690 of 2019 in CP 1799 of 2019 was allowed, and the Resolution Plan was approved. The Plan shall be binding on all stakeholders, and the moratorium under Section 14 of the Code shall cease. The RP is tasked with supervising the implementation of the Plan and reporting to the Authority. The Resolution Plan's approval does not waive any statutory obligations/liabilities, which must be addressed by the appropriate authorities.