TaxTMI 
TaxTMI 
2017 (12) TMI 562
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....ating Authority, vide order dated 10th February, 2017, admitted the Company Petition and appointed Shri C.B. Mouli as Interim Resolution Professional (IRP), and directed him to constitute a Committee of Creditors (CoC), and cause public announcement of initiation of CIRP of the Company as per the details given in section 15(1) and 15(2) on the www.ibbi.gov.in (designated website of Insolvency and Bankruptcy Board of India) etc. 3. In pursuance to the above order, the Resolution Professional, has made public announcement in Form- A in newspapers viz. The Hindu and SAAKSHI on 16th February, 2017 and it was also displayed in the IBBI website and Corporate Debtor's website as per IBC Regulations. Two (2) Registered Valuers namely M/s. Mott McDonald Pvt. Ltd., having its office at Level 4, Regus Business Centre, Gumidelli Commercial Complex, 1-10-39, to 44, Old Airport Road, Begumpet, Hyderabad-500016. Telangana, India at a remuneration of Rs. 2.50 Lakhs and another namely Servel Krishna Engineers Private Limited, having its office at C-23, Sterling Vilia, Vikrampuri, Secunderabad - 500009 on a remuneration of Rs. 1.50 Lakhs are appointed. 4. Since the Corporate Insolvency Res....
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.... It was discussed in detail and it was resolved to appoint SBI Capital Markets Ltd., to determine sustainable debt portion of the corporate debtor to enable the creditors to assess the viability of the resolution plan. It was resolved that Indian Bank, Lead Bankers, would fix fee to them and inform Resolution Professional who will have to appoint them for assignment to be given in a time frame of 15 days. It was resolved to have a creditors meeting to consider SBI Capital Markets Ltd. presentation and take a view in principle about the resolution plan proposed by the corporate debtor (4) 4th CoC Meeting was held on 27-6-2017 In the 4th CoC meeting held on 27-06-2017, Resolution plan submitted by Corporate Debtor was reviewed and SBI Capital Markets Limited's draft TEV report was considered and it was resolved that fresh infusion of funds of Rs. 150 Crores as projected is not acceptable if it comes as priority debt instead of equity. The Corporate Debtor shall infuse funds for working capital and the Corporate Debtor within 15 days or on or before 14th July, 2017 must come out with a concrete resolution plan including offering OTS accep....
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....d by the corporate debtor is under circulation and that corporate debtor shall improve the offer to enable to consider the resolution plan. The lending bankers of the committee indicated that the sustainable portion should be improved to 40% of the total debt. JMF ARC Limited holding 12.31% voting power had stated that they are not in favour of resolution plan submitted by the corporate debtor and they might reconsider only if the corporate debtor improves the levels of the sustainable debt. Corporate debtor was given one week's time and by 4th October, 2017 and shall circulate through email the ability to improve the levels of the sustainable debt and thereafter the committee of the creditors shall meet to take a final call on the resolution plan. The Corporate debtor had stated that during the last eight months, at any point of time, it was never suggested/indicated in the Committee of Creditors meetings to the company, that the resolution plan is required at the sustainable debt level of 40%. In view of the this development, the corporate debtor had sent a detailed mail to Lenders on 29.09.2017 explaining the entire position and with a req....
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....3 Central Bank of India 11.82 4 Oriental Bank of Commerce 10.94 5 Allahabad Bank 8.20 6 Bank of Maharashtra 6.36 TOTAL: 65.28 Corporate Debtor was asked to submit a fresh OTS proposal through email to all the bankers, which will be considered by them subject to the approval from their respective sanctioning authorities. Resolution Professional had expressed that Hon'ble NCLT Hyderabad Bench had given an extension of time to the members to go to their respective sanctioning authorities and now a fresh proposal for resolution plan would not meet statutory time period. The Corporate Debtor on 18-10-2017 sent a mail submitting the following OTS Scheme proposal as an alternative to the resolution plan already submitted and pending with the lenders for disposal, subject to approval of all financial creditors and Hon'ble NCLT, and offered the following terms: Sl. No. Particulars Details 1 One time Settlement (OTS) proposal for the All banks put together Rs.525.00 Crores 2 1st Instalment for the OTS proposal to be paid 10% of the OTS amount by 31st Ma....
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....rter notice u/s Regulation 19(2) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. (9) 9th CoC meeting was held on 27-10-2017 with members having 100% voting power (a) The Resolution Plan presented by the Resolution Professional based on the e-mail sent by the Corporate Debtor on 26-10-2017 late in the evening based on the suggestions in the JLF Meeting, which was immediately circulated to the Members of the CoC, was approved by members of CoC having 55.73% voting power: S.No Name of the Bank % of Voting Power 1 Indian Bank 22.33 2 JM Financial Asset Reconstruction Co. Ltd. 12.39 3 Allahabad Bank 8.20 4 Andhra Bank 12.81 Total 55.73 Had submitted their in principle approval from their Sanctioning Authorities and Indian Bank confirmed by their letter: IBHYDMAIN:KSPLOTS 2017-18 dated 27-10-2017 & Allahabad Bank by way of mail dated 27-10-2017 confirmed subject to providing final sanction after getting sanction from appropriate authorities fr the same is accepted by majority of the Lenders. (b) Indian Overseas Bank having voting power of 15.15% rejected t....
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....ime as required by the financial creditors as per their advice and discussions in various CoC meeting held on different dates. The Company has clearly expressed many a times to the lenders that the Company is ready to cooperate for successful implementation of resolution plan and sort out the issue amicably. In spite of all the above developments, no concrete resolution plan has emerged from the financial creditors, till date. The Company submitted that as per the Resolution Plan proposed under sustainable debt option, the proposal does not intend any hair cut on the principle debt to the banks. 6. Resolution Professional, therefore, submitted that he has followed all extant provisions of IBC in respect of CIRP in question and thus Resolution is in accordance with law and it may be approved by the Tribunal/Adjudicating Authority. He has also relied upon the following judgments and guidelines/notifications of Reserve Bank of India:- (i) The Observations of the NCLT Mumbai Bench in the matter of Raj Oil Mills Ltd and Edelwise Asset Reconstruction Company Ltd, based on the observations by the Hon'ble Supreme Court in the cases of Bachandevi v. Nagar Nigam, Gor....
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....r the JLF Meeting along with the Corporate Debtor on 26.10.2017 evening and The Banking Regulation Act, 1949 envisages a consensus among lending bankers with a majority of 60% of creditors by value and 50% of creditors by number. Though l&B Code, 2016 is a different enactment, but the intent and spirit is similar to go by the decision of the majority of lending banks. 8. The learned Resolution Professional, by taking into consideration of above legal position, the voting pattern, prays to treat the resolution plan/revised OTS in question as approved and accordingly, approve the same under section 30(4) of IBC, 2016. 9. The Learned Resolution Professional further stated the following in the resolution plan: Operational Creditors (i) Electricity Dues - TSSPDCL - Rs. 14.23 cr. (ii) Other operational creditors - Rs. 0.13 cr. (iii) Statutory Dues - NIL (iv) Dues to Employees - NIL The operational creditors shall be paid in a staggered manner after payment to financial creditors in the usual course of business. There are creditors for capital expenditure which shall also be paid from operational cash flows in the normal course of busi....
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....ich we are entitled as per the provisions of the Insolvency and Bankruptcy Code 2016, we reserve our right to proceed against the guarantors for recovery of balance dues to our Bank". 13. He further contended that if the process of liquidation of the company's assets, if opted for, is a time SM consuming process and realization of the assets will take a minimum of 2 to 3 years. In such case, the valuation will only deplete and it is opined by the majority of the lenders that it may not fetch more than Rs. 600 Crores at any point of time and hence, the OTS offer of Rs. 600 crore is acceptable. 14. Further it is also noted that Central Bank of India with voting share of 11.82% had not provided any reasons for dissenting to the resolution plan by way of OTS proposal. However, the dissenting creditors would be conveniently paid their dues in accordance with the Regulation 38(c) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution process for Corporate Persons) Regulations, 2016. And is not prejudicial to their interest's as in the case of "Kamineni Steel and Power India Private Limited" the average liquidated value as determined by the two Registered Val....
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.... many a times to the lenders that the company is ready to cooperate for successful implementation of resolution plan and sort out the issue amicably. The company was providing employment to around 450 employees both skilled (325) and unskilled (125) workers who hails mostly from Narketpally and nearby villages in Nalgonda District of Telaneana. Most of this workforce belongs to weaker section communities with poor economic background. As the company was not able to function due to various reasons as stated above, almost all the workforce have lost their jobs and employment. Ultimately the employees and workers and their family have lost their livelihood. Once the company is able to start functioning most of the employees/workers, who lost the jobs and employment earlier, will be taken back by the company and they all shall join the employment immediately as they are all local villagers, who are eagerly waiting to join the factory for own and their family livelihood. 19. Once the Resolution Plan is approved and put in place the company shall commence its operations which will increase manufacturing activity in the area and save the livelihood of around 450 workforce and their fam....
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....either the borrower nor the RP have made any effort to find a suitable investor so that the Bank and other lenders could have minimized the losses by getting a higher value to the borrower. Further the Bank's internal rules do not allow any compromises/settlements wherein the repayment is beyond 12 months. It is further contented that Bank's right to recover against the borrower and guarantors (Personal & Corporate) should not simply be waived merely because it is convenient to do so. It is further submitted RRP-OTS submitted by RP without clarity on source of funds or recoverable value from Corporate Guarantor and personal guarantor is highly irregular and bank will suffer enormous loss. 21. Dr. K. Shashidhar, S/o K. Suryanarayana, Managing Director, KSPL and also a Resolution Applicant appeared before the Adjudicating Authority on 06.11.2017 and inter alia submitted as follows: (1) Kamineni Steel El Power India Private Limited was incorporated as a Private Limited Company in the State of Andhra Pradesh on 20.10.2008 with an immediate object to set up a manufacturing facilities for the production of Steel Billets with an installed capacity of 360,000 MTPA and a....
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....ciation (IBA) at the behest of RBI. The IEC Committee has, thoroughly studied the TEV study report and after thorough deliberations with the lead bank/Indian Bank representatives, has vetted and endorsed the proposed restructuring scheme for its implementation, vide their communication dated 05.08.2015. (The composition of IEC Committee includes members from Institute of Cost and Works Accountants of India, President of Institute of Valuers of India and President of Institute of Engineers of India). (7) Taking the cognizance of all the above events, Indian Bank has prepared a Joint appraisal note and sent the same to all the banks on 31.08.2015 for sanction of Flexi restructuring scheme. As per the RBI scheme it has to be sanctioned and implemented within 120 days from the date of JLF meeting (JLF meeting was held on 04.07.2015 for implementing the scheme and it has to be implemented by 04.11.2015). However the same has been implemented by 4 banks on different dates and four banks are yet to implement the same even after two years. (8) While Flexi Restructuring Scheme proposal is under process of implementation by some of the banks including Indian bank, during th....
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....Sustainable Debt of Rs. 360 crores Rs.150 crores will come as non-priority debt/Equity. Rs.100 crores will come as advances from suppliers to ease working capital liquidity. No fresh funding either by way of terms loan/funded interest term loan or working capital from the lenders. There is no sacrifice on the total actual debt of Rs. 1405 crores due to the lenders The modality of payments for sustainable and unsustainable debts is as per the study report of SBI Capital Market Limited. SBI Capital Markets Limited has submitted its final study report during Sept-2017 and confirmed the sustainable debt as Rs. 360 crores. The third resolution plan submitted by the company during Aug-2017 as mentioned in (b) above is totally in tune with the SBI Capital Markets Limited final report. 24. Shri V.K. Sajith, learned Counsel for the lead Banker i.e. India Bank in support of his contentions have relied upon the following judgments:- The Hon'ble Appellate Tribunal in "Palogix Infrastructure Limited v. ICICI Bank Limited"-Company Appeal (AT) (Insol.) No. 30 of 2017. By judgment dated 20th September, 2017 held: "32....
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....he words used by the legislature themselves declare the legislative intent particularly where the words of the statute are clear, plain and unambiguous. In such case, effort must be to give a meaning to each and every "word" used by the legislature and it is not sound principle of construction to brush aside words in statute as being redundant or surplus, and particularly when such words can have proper application in circumstance conceivable within the contemplation of the statute For determination of the issue whether a provision is mandatory or not, refer to decision of Hon'ble Supreme Court in State of Mysore v. V.K.Kangan [1976]2 SCC 895. In the said case, the Hon'ble Supreme Court specifically held: In determining the question whether a provision is mandatory or directory, one must look into the subject matter and consider the importance of the provision disregarded and the relation of that provision to the general object intended to be secured. No doubt, all laws are mandatory in the sense they impose the duty to obey on those who come within its purview. But it does not follow that every departure from it shall taint the proceedings with a fatal blemish. Th....
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....share of the financial creditors. (5) The resolution applicant may attend the meeting of the committee of creditors in which the resolution plan of the applicant is considered: Provided that the resolution applicant shall not have a right to vote at the meeting of the committee of creditors unless such resolution applicant is also a financial creditor. (6) The resolution Professional shall submit the resolution plan as approved by the committee of creditors to the Adjudicating Authority. (2) Approval of resolution plan. Section 31: 1. If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors under sub-section (4) of Section 30 meets the requirements as referred to in sub-section (2) of section 30, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan. 2. Where the Adjudicating Authority is satisfied that the resolution plan does not confirm to the requirements referred to in sub-section (1), it may, by an order, reject the reso....
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.... 5. Any creditor who is a member of the committee of creditors may appoint an insolvency Professional other than the resolution Professional to represent such creditor in a meeting of the committee of creditors: Provided that the fees payable to such insolvency Professional representing any individual creditor will be borne by such creditor. 6. Each creditor shall vote in accordance with the voting share assigned to him based on the financial debts owed to such creditor. 7. The Resolution Professional shall determine the voting share to be assigned to each creditor in the manner specified by the Board. 8. The meetings of the committee of creditors shall be conducted in such manner as may be specified. (5) The Resolution Professional has to prepare an information memorandum as per section 29, which reads as under: Section 29: 1. The resolution Professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the Board for formulating a resolution plan. 2. The resolution Professional shall provide to the resolution applicant access to all rel....
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....eir claims admitted and the security interest, if any, in respect of such claims; e. particulars of a debt due from or to the corporate debtor with respect to related parties; f. details of guarantees that have been given in relation to the debts of the corporate debtor by other persons, specifying which of the guarantors is a related party; g. the names and addresses of the members or partners holding at least one per cent stake in the corporate debtor along with the size of stake; h. details of all material litigation and an ongoing investigation or proceeding initiated by Government and statutory authorities; i. the number of workers and employees and liabilities of the corporate debtor towards them; j. the liquidation value; k. the liquidation value due to operational creditors; and l. other information, which the resolution Professional deems relevant to the committee. (2) The matters listed in paragraphs (a) to (i) j above shall be submitted before the first meeting of the committee and the matters listed in paragraphs (j) to (1) shall be submitted within 14 days of the first meeting of the commi....
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....mission of proofs of claim, which shall be fourteen days from the date of appointment of the interim resolution Professional. 3. The applicant shall bear the expenses of the public announcement which may be reimbursed by the committee to the extent it ratifies them. Clarification:- The expenses on the public announcement shall not form part of insolvency resolution process costs. Regulation.7: Claims by Operational Creditors. 1. A person claiming to be an operational creditor, other than workman or employee of the corporate debtor, shall submit proof of claim to the interim resolution Professional in person, by post or by electronic means in Form B of the schedule: Provided that such person may submit supplementary documents or clarifications in support of the claim before the constitution of the committee. 2. The existence of debt due to the operational creditor under the Regulation may be proved on the basis of- (a) the records available with an information utility, if any; or (b) other relevant documents, including- (i) a contract for the supply of goods and services with corporate debtor; ....
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....tage of voting rights required for quorum in respect of any future meetings of the committee. (2) Where a meeting of the committee could not be held for want of quorum, unless the committee has previously decided otherwise, the meeting shall automatically stand adjourned at the same time and place on the next day. (3) In the event a meeting of the committee is adjourned in accordance with sub-regulation (2), the adjourned meeting shall be quorate with the members of the committee attending the meeting. Regulation.25: Voting by the committee: (1) The actions listed in section 28(1) shall be considered in meetings of the committee. (2) Any action other than those listed in section 28(1) requiring approval of the committee may be considered in meetings of the committee. (3) Where all members are present in a meeting, the resolution Professional shall take a vote of the members of the committee on any item listed for voting after discussion on the same. (4) At the conclusion of a vote at the meeting, the resolution Professional shall announce the decision taken on items along with the names of the members of the committee w....
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....s and liabilities, as on the insolvency commencement date, classified into appropriate categories for easy identification, with estimated values assigned to each category; (b) the latest annual financial statements; (c) audited financial statements of the corporate debtor for the last two financial years and provisional financial statements for the current financial year made up to a date not earlier than fourteen days from the date of the application; (d) a list of creditors containing the names of creditors, the amounts claimed by them, the amount of their claims admitted and the security interest if any, in respect of such claims; (e) particulars of a debt due from or to the corporate debtor with respect to related parties; (f) details of guarantees that have been given in relation to the debts of the corporate debtor by other persons, specifying which of the guarantors is a related party; (g) the names and addresses of the members or partners holding at least one per cent stake in the corporate debtor along with the size of stake; (h) details of all material litigation and an ongoing investigation or proceeding init....
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.... Regulation.38. Mandatory contents of the resolution plan:- (1) A resolution plan shall identify specific source of funds that will be used to pay the - (a) Insolvency resolution process costs and provide that the insolvency resolution process costs will be paid in priority to any other creditor; (b) Liquidation value due to operational creditors and provide for such payment in priority to any financial creditor which shall in any event be made before the expiry of thirty days after the approval of a resolution plan by the Adjudicating Authority; and (c) Liquidation value due to dissenting financial creditors and provide that such payment is made before any recoveries are made by the financial creditors who voted in favour of the resolution plan. (2) A resolution plan shall provide: (a) the term of the plan and its implementation schedule; (b) the management and control of the business of the corporate debtor during its term; and (c) adequate means for supervising its implementation. Regulation.39: Approval of resolution plan:- (1) A resolution applicant shall endeavour to submit a resolutio....
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....ores for steel and Rs. 717 crores for power). The total Equity is Rs. 286 crores (steel Rs. 126 crores and power Rs. 160 crores). Steel division commenced its operation on 30.03.2013. (b) The Company is situated at Sreepuram Village, Narketpally Mandal, Nalgonda District, Telangana. The Company was functional till the financial year 2014-15 and, it could not continue due to shortage of working capital and various other factors which includes mismatch of cash flow and financial crises leading to heavy operational losses and consequent erosion of entire net worth. Therefore the Company has filed an application to BIFR on 15.11.2016 under sub-section (1) of Section 15 of Sick Industrial Companies (Special Provisions) Act 1985. The present CP is filed for implementation of Resolution Plan for re-phasement and restructuring of debt, for re-starting of its operation and serviceability of debt obligation and to re-start the manufacturing activities. The Company was giving employment to around 450 employees both skilled (325) and unskilled (125) workers who hail mostly from Narketpally and nearby villages in Nalgonda District of Telangana. Most of this workforce belongs to weaker ....
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....has prepared the resolution plan strictly in accordance with law. There are various options as proposed by Resolution Applicant were placed and considered by CoC and ultimately the present resolution plan with OTS of Rs. 600 crores is emerged which accepted by five Banks. The Resolution Professional, who is having experience in insolvency procedure and duly approved by the IBBI, is competent to analyze the pros and cons of Resolution plan and submit his views on the issue and then Adjudicating Authority is also empowered to analyze the same either for approval or to reject the plan. b. The RP conducted 9 CoC meetings on various dates as narrated above. From the material available on record it is observed that apart from the Resolution Proposals/Revised OTS Scheme submitted by the Corporate Debtor, the CoC do not have any other alternative proposal/Resolution Plan for further evaluation/comparison. Therefore, in the absence of any other alternative proposal other than the Revised OTS proposal which is approved by the majority of the Financial Creditors/Lender Banks totalling to approximately 66.67% of total voting share of Financial Creditors and 5 out of 8 total Financial ....
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....ly subsequent to that meeting, which is also not in accordance with their own decision as recorded in the 6th CoC as stated above. f. Voting by the Committee as per Regulation 25(3) and (4), the Resolution Professional shall take a vote of the 'members of the committee and at the conclusion of the meeting the Resolution Professional shall announce the decision taken on each item along with the names of the members of the committee who voted for or against the decision, or abstain from voting. However, as per the records submitted, all the members did not exercise their vote(s) during the meetings held. Whereas, they have conveyed their approval/concurrence, subsequently only by way of e-mail/letters, which is not in compliance with the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations 2016. g. The Bank of Maharashtra having 6.36% voting share was remain open for the revised OTS proposal, however subsequently they have also joined with other two dissenting Banks and conveyed their disapproval before the Adjudicating Authority, apparently not to the Resolution Professional during the CoC meetings/JLF meeti....
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....dicating Authority to arrive at a resolution for the issue in question, since the last date even as per the extended time line of 270 days is on 07.11.2017 Accordingly, GMs of all the three Banks were present. However, the Adjudicating Authority surprisingly noted that in spite of spending considerable time, given the whole picture of the need for resolution of Corporate Debtor which had provided direct employment opportunity to around 450 employees till recently and a number of indirect employees/families/beneficiaries, possible contribution by way of revenue to the exchequer, the contribution to GDP etc., the GMs of the 3 Banks did not even move an inch forward from their previous stand and they simply reiterated/stated that the revised OTS amount proposed by the Corporate Debtor is very less. e. In spite of repeated questions posed by the Adjudicating Authority at different points as to what extent these three banks would agree for the Revised OTS scheme they simply reiterated time and again that the amount has to be increased substantially, but surprisingly never revealed/indicated their revised/expected amount. f. As per the direction of the Adjudicating Auth....
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....he decision of the majority especially in this case wherein 2/3rd of total voting share of the Financial Creditors have approved the revised OTS. i. As per the revised debt outstanding, submitted by the RP vide written submission dated 31.10.2017, an amount of Rs. 187.05 crores is the debt outstanding to JMF ARC Limited, an amount of Rs. 228.26 crores to IOB, an amount of Rs. 178.36 crores to Central Bank of India and an amount of Rs. 96 Crores to Bank of Maharashtra. As discussed supra even the private sector ARC whose outstanding debt amount is greater than the Central Bank of India and Bank of Maharashtra have accepted the revised OTS scheme. From the above facts it appears that private sector ARC is willing to take a haircut/absorbing loss, whereas three public sector banks are not inclined to take haircut/absorbing loss, even though the other PSBs were willing to take haircut. Therefore, various contentions raised by the three dissenting Banks are not tenable and baseless and thus rejected. 3. Mechanism of Joint Lenders Forum: a. JLF is one of the mechanism devised by RBI in the year 2014, for rectification, recovery of the loans, restructure, if the....
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....amework is to ensure timely and transparent mechanism for restructuring the Corporate Debts of viable entities facing problems outside the purview of BIFR, DRT and other legal proceedings for the benefit of all concerned. It aims at preserving viable corporate that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme. The CDR standing forum would be representative general body of all financial institutions and banks participating in CDR system. d. As per one of the CDR circular bearing No. CDR (PMJ) No. 2015-16 dated 25th June, 2015, BIFR cases are covered under clause 6.2 and suit filed case are covered under clause 6.3 are also covered under the scheme. As per clause 6.3,, the accounts where recovery suits have been filed by Corporates against Companies also eligible for consideration under CDR system provided the initiative to resolve the case under the CDR system is taken by at least 75% of creditors (by value) and 60% of creditors (by number) The decision process in CDR system is given under clause 8. As per clause 8(2), the CDR empowered group h....
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....of non-performing assets, to bring them to a definite conclusion. It says that Government is committed to expeditious resolution of stressed assets in banking system. The recent enactment of Insolvency and Bankruptcy Code, 2016 has opened up new possibilities for time bound resolution of stressed assets. The SARFAESI and Debt Recovery Acts have been amended to facilitate recoveries. A comprehensive approach is being adopted for effective implementation of various schemes for timely resolution of stressed assets. Before the introduction of IBC 2016, Stressed Assets Resolution Mechanism was among other mechanisms viz. the concept of JLF and CAP. The Joint Lenders Forum (further referred to as JLF),was constituted on the directions of the RBI. In this context, it is relevant to point out here that RBI guide lines/circular issued vide RBI/2013-14/503 dated 26th February, 2014. It is relevant to point out here the RBI guidelines/circular vide Notification No.RBI/2016-17/299/DBR.BP.BC. No. 67/21.04.048/2016-17; dated 5th May, 2017 in which it is stressed for early identification of stressed Assets and timely implementation''of a Correction Action Plan (CAP) to preserve t....
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....nsiderable time and heard the matter on 03.11.2017 and 06.11.2017 on two occasions on each day i.e. to ensure that the Resolution Plan is being approved and the Corporate Debtor is being revived rather than going for liquidation. As generally known, in most of the cases the liquidation, value will not match with the outstanding loan amount (including interest) especially in the case of distressed sale. 4. IBC Code: a. The main preamble of the IBC is the resolution of the Corporate Debtor rather than the liquidation of the Corporate Debtor. As per the stringent stand of these 3 dissenting Banks it clearly shows that they did not exhibit positive approach in revival of Corporate Debtor and mostly interested in the liquidation of the Corporate Debtor. b. The salient features of the code are resolution of corporates in a time bound manner, maximization of value of assets, to promote entrepreneurship, availability of credit and balance the interest of all stakeholders etc. When decisions are taken in a time bound manner, there is a greater chance that the firm can be saved as a going concern and the productive resources of the company (the labour and the capit....
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.... at various places the word "may" and "shall" are used. However, Section 30(4) states that the CoC may approve the resolution plan by a vote of not less than 75% of voting shares of the financial creditors. Further, under Section 31 it is provided that "if the adjudicating authority is satisfied ....". Therefore, we are of the considered view that even though the CoC may approve a resolution plan with not less than 75% of the voting share, a discretion is given to the Adjudicating Authority to approve the Resolution Plan. d. Even Sub-Section (2) of Section 31 of IBC gives a discretion any power to the Adjudicating Authority to reject the resolution plan even if it does not confirm to the requirements referred to in Sub-Section (1). This Section also used the term "may" instead of "shall". e. Therefore, a paramount duty is cast upon the adjudicating authority while approving the resolution plan he has to exercise his judicious mind in the facts and circumstances of specific case, to consider the spirit of the code and to grant due consideration for the socio economic benefit/cause etc. As discussed in pre pages, the Corporate Debtor is the only major company situat....
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....ere the observation of Hon'ble Supreme Court of India in Jamaluddin Ahmad v Abu Saleh Najmuddin which is extracted as follows: the relevant obiter or ratio: '14. The judicial function entrusted to a Judge is inalienable and differs from an administrative or ministerial function which can be delegated or performance whereof may be secured through authorization. "The judicial function consists in the interpretation of the law and its application by rule or discretion to the facts of particular cases. This involves the ascertainment of facts in dispute according to the law of evidence. The organs which the State sets up to exercise the judicial function are called courts of law or courts of justice. Administration consists of the operations, whatever their intrinsic nature may be, which are performed by administrators; and administrators are all State officials who are neither legislators nor judges."(See Constitutional and Administrative Law, Phillips and Jackson, 6th Edn., p. 13.) P. Ramanatha Aiyar's Law Lexicon defines judicial function as the doing of something in the nature of or in the course of an action in court, (p. 1015) the distinction between....
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....editors" Resolution maximises the value of assets of the corporate and enables every stakeholder to continue with the corporate to share its fate. Therefore, maximization of value of assets and balancing the interests, resolution triumphs over recovery as well as liquidation in most cases. 6. Banking Sector: As generally known in the Banking/Corporate Sector, if any compromise has to be arrived at either party will incur a loss/forgo to certain extent in the process of negotiation, even the aggrieved party/the lender also has to quote the acceptable amount of settlement with attending terms and conditions to resolve the issue. However, in the instant case, strangely all the three (3) Banks did not quote the acceptable amount of settlement towards OTS, rather simply reiterated that the amount quoted by the Corporate Debtor is less. We also recognize the fact that each Bank will have its own internal policies, profit margin etc., based on employees cost, cost of borrowing, internal rate of return, own business strategy etc. However, in the instant matter, when more than 2/3rd of voting shares in the CoC approved by Public Sector Banks, who contribu....
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...., registering a growth of 84.77%. The Banking industry faces challenges from mounting NPA and Resolution thereof. Further, he also stated that IBC, 2016 should speed up the recovery process. Asset quality has been the concern of the Bank for last couple of years. Net NPA to net Advances increased to 10.20% as on 31.03.2017 from 7.36% as on 31.03.2016. The Bank has been proactive in respect of NPA management and shall continue its efforts to reduce the NPA level. The Bank has made provisions for NPAs for the year ending 31.03.2016 an amount of Rs. 4,913 crores and an amount of Rs. 6,216 crores for the year ending 31.03.2017. The RBI has also revised the characteristics of Prompt Corrective Action (PCA) and stressed on asset quality and profitability to monitor Banks.' The Bank also has Credit Monitoring Department and Recovery Department, the same encompasses in all areas of NPA management including company settlements, OTS Schemes etc. As per the consolidated Cash Flow statement for the year ended 31.03.2017, an amount of Rs. 6,219.53 crores was shown as bad debts written off/provision in respect of NPA. Letter from Managing Director and Chief Executive Office....
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....arings held, the financial creditors have orally indicated that even if those guarantees are considered the same is not more than Rs. 30 crores approximately, which should not deter the current OTS proposal. Having seen merits in their submissions, the Adjudicating Authority is of the view that the personal guarantee, the guarantee given by the other corporates can be suitably dealt with by the lenders as per their loan agreements in addition to the current OTS Scheme. In most of cases, the liquidation value may not match the actual outstanding debt amount and the lenders either PSBs, Financial Institutions, ARCs etc. have to absorb some losses and in reality, have been absorbing some losses or to take some haircut. Even, the Government both Central and State also forgoes their dues especially tax dues, other payment to various Government agencies/service providers like electricity, water charges etc. Therefore, sacrificing some amount of loss for revival/the resolution plan, is part of the lenders considering the employment opportunity, socio economic objectives etc. As per the valuation carried out by two registered valuers, the liquidation value is approximately Rs. 760....
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.... also noted that in the instant case 9 (nine) CoC meetings were conducted and therefore, the issue of source of funds should have been discussed/sorted out in the CoC meetings rather than bringing the same as an issue before the Tribunal as a reason for rejecting the Revised OTS Scheme. However, it is noticed that in the 6th CoC meeting held on 24.10.2017, the corporate debtor also submitted an EOI from AREA Group of Companies to infuse Rs. 150 crore as an equity share capital, preference share capital, debentures subject to getting firm approval from the lenders. As can be seen from the above discussions, the revised OTS Scheme is yet to be approved, therefore, it would be difficult to firmly tie-up the entire source of funds required in the absence of approval granted by financial creditors. The submission of the IOB that the Kamineni Group also has medical college, other educational institutions may not be of much relevance until unless they are guarantors to the corporate debtor. In his affidavit he also questioned that when other companies dealing in steel, doing well in the line of activity etc, the reference of Kamineni Steel accounts to NCLT does not to seem to be jus....
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....ords shows that though the Committee of Creditors have attended all the meetings, they have kept uncertainty pending till 180+90 days period prescribed under the Code, forcing the Tribunal to call all concerned parties to depose before the Tribunal as detailed in this order. 33. It is necessary to advert to the contentions of the three dissent banks for non-approval of the plan. However, all the Banks have not filed any documents in support of their contentions. As stated supra, all the Banking Sector in the Country are bound by various guidelines/circulars issued by RBI from time to time and also the policy of Government of India as detailed supra.'It is also relevant to point here that dissenting Banks are also governed by same set of rules/guidelines as followed by other five banks who have accepted the Resolution plan. The CIRP Process also allows a dissenting financial creditor to exit at the liquidation value. 34. It is not in dispute that IBC is the only alternative available to resolve insolvency and Bankruptcy for debts of any Financial Creditor/Operational Creditor, under sections 7, 8, 9 & 10 of the Code. The Contentions of 3 dissenting Bankers as they would re....