Tribunal Approves Resolution Plan by Kals Distilleries Pvt. Ltd., NCLAT Reclassifies Sach Marketing Pvt. Ltd.'s Claim

The tribunal approved the resolution plan submitted by Kals Distilleries Pvt. Ltd., directing compliance with IBC requirements and obtaining CCI approval within one year. The moratorium ended, and the RP was tasked with transferring CIRP records to the IBBI, concluding IA No. 186/JPR/2019. Sach Marketing Pvt. Ltd.'s claim was reclassified as financial debt by the NCLAT, allowing consideration of the resolution plan without CoC reconstitution.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Constitution and Meetings of the Committee of Creditors (CoC)
3. Eligibility Criteria and Submission of Resolution Plans
4. Extension of CIRP Period
5. Approval and Compliance of Resolution Plan under the Insolvency and Bankruptcy Code (IBC)
6. Classification of Debt as Financial Debt

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Oriental Bank of Commerce, a financial creditor of the corporate debtor, Mount Shivalik Industries Limited, filed CP (IB) No. 86(ND)/2017 under Section 7 of the IBC seeking initiation of CIRP. The tribunal admitted the petition and declared a moratorium on 12.06.2018, appointing Ms. Pratibha Khandelwal as the Interim Resolution Professional (IRP).

2. Constitution and Meetings of the Committee of Creditors (CoC):
Following the public announcement on 15.06.2018, claims from five financial creditors were verified, and the CoC was constituted. In its first meeting on 12.07.2018, the CoC unanimously resolved to continue the IRP as the Resolution Professional (RP). Subsequent meetings discussed confidentiality undertakings, eligibility criteria for resolution plans, and reconstitution of the CoC with revised voting shares.

3. Eligibility Criteria and Submission of Resolution Plans:
The CoC established criteria for prospective resolution applicants, including a net worth of at least Rs. 50 Crores and an earnest money deposit of Rs. 50 lakhs. The first Form G was published on 22.08.2018, and four Expressions of Interest (EOIs) were received. However, only two applicants submitted resolution plans, which were later withdrawn, necessitating fresh EOIs. Eventually, resolution plans from Som Distilleries Pvt. Ltd. and Kals Distilleries Pvt. Ltd. were considered, with the latter being approved by the CoC.

4. Extension of CIRP Period:
The tribunal extended the CIRP period by 90 days on 29.11.2018, following an application by the RP. Fresh EOIs were issued on 01.01.2019, with an extension for submission granted via corrigendum on 20.01.2019. The CoC received four EOIs, and the tribunal allowed exclusion of certain periods lost in litigation on 28.02.2019.

5. Approval and Compliance of Resolution Plan under the IBC:
The tribunal examined the resolution plan of Kals Distilleries Pvt. Ltd. for compliance with Section 30(2) of the IBC, which mandates provisions for insolvency resolution process costs, operational creditors' payments, management of the corporate debtor, implementation and supervision of the plan, and non-contravention of existing laws. The RP confirmed compliance with these requirements, including submission of a performance guarantee and certification of no contravention of laws.

6. Classification of Debt as Financial Debt:
Sach Marketing Pvt. Ltd. challenged the classification of its claim as operational debt. The NCLAT, in its order dated 07.10.2021, held that the debt should be treated as financial debt, as the security deposit had an element of interest payable, thus having a commercial effect of borrowing. The NCLAT directed the tribunal to consider the resolution plan without reconstituting the CoC, as the appellant did not intend to oppose the plan but sought recognition of its debt as financial.

Conclusion:
The tribunal approved the resolution plan submitted by Kals Distilleries Pvt. Ltd., binding on all stakeholders, and directed the resolution applicant to obtain Competition Commission of India approval within one year. The moratorium ceased, and the RP was instructed to forward CIRP records to the IBBI. IA No. 186/JPR/2019 was disposed of accordingly.

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