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2017 (11) TMI 1771
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....unal. It is stated in the report that the resolution plan was presented by Mr. Mahesh Kr. Agarwal to the CoC. It is further noted that another resolution plan was submitted by resolution applicant, SREI Equipment Finance Ltd. in the meeting of CoC convened and held, by the relevant provisions of the Code and CIPR Regulations on 11th October, 2017. 2. It is further stated in the report that all the financial creditors (representing 100 per cent of the total claims submitted), who had filed the claims were present through their authorised representatives. CoC approved the resolution plan submitted by Mr. Mahesh Kr. Agarwal by 78.53 per cent of the voting share of the financial creditors of Sree Metaliks Ltd. It is further contended that in the meeting of the CoC, SREI objected to the resolution plan by Mr. Mahesh Kumar Agarwal. Sri Mahesh Agarwal also submitted an addendum to its resolution plan. CoC agreed to consider the addition provided by Mr. Mahesh Agarwal. 3. It is also stated in the Report that SREI objected to the resolution plan of Mr. Mahesh Kumar Agarwal on various grounds and after that Mr. Mahesh Kumar Agarwal sought modifications in his resolution plan. The CoC a....
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....gements with two mining contractors/corporates of Odisha, viz., Triveni Earth Movers (P.) Ltd. and Ahluwalia Mines, who have agreed to support SML in its revival plans. For this purpose, the above two mining contractors have constituted on SPV company as their joint venture. This PV will enter into a long-term mining operations contract with SML. The SML plan then goes on the recording that: "They will be making the required investments in the mines in the form of required equipment, the creation of infrastructure as well as assisting the company in getting various approvals, etc., and also financially - i.e., the cost required for this purpose." 2.3 It is, thus, apparent that the mines shall not only be operated, but all such operations, equipment and infrastructure shall also be financed by third parties. The SML plan proposes something which is blatantly in contradiction to the rule 24(b) of the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 and, therefore, squarely attracts the mischief of section 30(2)(e) of the Code. The SML plan proposes something which is not only illegal but will also put the entire operations of SML....
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....rge on the fixed assets/current assets of the company (excluding the assets/machinery charged explicitly to the lenders against such machinery/vehicles). Class "B" secured creditors represent those secured creditors not forming part of the consortium, and who are not having a first pari passu charge on the fixed assets/current assets of the company but who are either having specific exclusive charge on the machineries/equipments funded by them or certain other securities like pledge of shares and/or second charge on the fixed assets of the company. In the event of liquidation, the secured creditors having the first charge on the fixed asset block of the company would exercise the SARFAESI rights available to them and in that event, except for other secured creditors having a specific charge on the machinery/equipment available with them as security, and would realise only the liquidation value of such security available, no other creditors either financial or operational would get any amount through the waterfall arrangement. On this logic, the treatment proposed to be accorded to the different class of secured creditors regarding crystallisation of the settlement....
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....better treatment under the said SML plan than SREI. All these favours have been showered on these so-called Class A creditors for the reason that they together form a consortium. Section 24(6) of the Code points at a notional disbanding of any consortium arrangement so that each financial creditor stands on his own feet and be a beneficiary by solely depending on his financial debt outstanding. 6. The SML plan grossly violates the objects of the Code and creates a class within a class per cent haircut on their claim while allowing Class A secured creditors a 25 per cent hair-cut and further equity shares have been proposed to be provided only to Class A term lenders, i.e., Edelweiss, JM Financial and OBC. The sole motive for such classification is to deprive a particular class of secured creditors at the cost of unjustly enriching the other class of secured creditors. SML plan has been prepared on a discriminatory policy. It has to bear in mind that in a resolution process, the corporate debtor is always treated as a going concern. The question of fixed assets as security comes in only when a corporate debtor has gone into liquidation. The SML plan discri....
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....not a single communication has been addressed to the resolution professional. Also, the said prospective investor has made direct/indirect investments of INR 20 crore which has come to light at the fag end of the insolvency resolution process. The terms for such fund infusion has also not been disclosed to the resolution professional and the present management of the corporate debtor. Further, the view in the COC is that the transaction for iron ore mine is an extortionate transaction and RP has assessed the same. RP has expressed reservations about handing over the company back to the same management who is responsible for this proceedings in the first place. Since RP has questioned the credibility of the investor stated in the SML plan. If press reports are to be believed such concerns cannot be brushed aside. It is clear from minutes that this investor has directly financed SML for obtaining mining lease. The commercial terms as stated by the investor refers to complete capture of the mines and the business entity of SML without even being an equity investor in SML. The mining, buying and selling activities of SML on the one hand and the credit terms on the other shall be comple....
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....irmation the SML plan cannot be submitted for voting by COC. We have heard the arguments of learned counsel representing the resolution professional and the argument of the learned counsel of the financial creditor, SREI Equipment Finance Ltd. Shri Kuldeep Verma, resolution professional, has submitted his resolution plan under section 30(6) of the Code read with regulation 39(iv) of the CIRP Resolutions which is approved by the CoC, Sree Metaliks Ltd. Shri Kuldeep Verma has also annexed the copy of the resolution plan along with the details, which shows that the resolution plan submitted by Mr. Mahesh Kumar Agarwal has been approved by the CoC with 78.53 per cent of the voting share of the financial creditors of Sree Metaliks Ltd. The learned Resolution Professional has given the details of vote share which shows that 21.47 per cent of the creditors voted against the resolution plan and 78.53 per cent of the creditors voted in favour of the resolution plan. Section 31(1) of Code provides that if the Adjudicating Authority is satisfied with the resolution plan as approved by the CoC under sub-section (4) of section 30 meets the requirements as referred to in sub-section (2)....
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.... the Code. 5. Other main objection, which has been raised, is on the point that the approval of the present resolution plan is against the earlier decision taken in the CoC held on 25th September 2017 whereby CoC had rejected the resolution plan submitted by the same promoter of the corporate debtor, Mr. Mahesh Kumar Agarwal. It is pertinent to mention that CoC in its meeting dated 25th September, 2017 was taken on the ground of non-clarity on the mining contractor arrangement and CEC observation in the past for such mining contractors and specific other related issues during CIRP process and lack of trust and confidence on Mr. Mahesh Kumar Agarwal. 6. It is on record that resolution plan earlier submitted by Mr. Mahesh Kumar Agarwal, promoter of the corporate debtor was rejected in its meeting dated 25th September 2017 but it is written in the report that COC in its meeting dated 25th September 2017 has passed a resolution that the resolution plan submitted by Shri Mahesh Kumar Agarwal cannot be accepted in its present form and cannot be put to the vote due to non-clarity of mining contractors arrangement, CEC observation on the mining contractors and specific other related ....
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....Odisha, viz., Triveni Earth Movers Ltd. and Ahluwalia Mines, who have agreed to act as the mining contractors. For this purpose, the above two mining contractors have constituted an SPV company as their joint venture, KJS Pellets & Power (P.) Ltd. This SPV company will enter into a long-term mining operations contract with SML and will be paid the contracting charges including raising costs at the standard prevailing market rates. They will also be assisting the company in getting various approvals, and they will be giving specific unsecured interest-bearing advances like security deposits to SML. It is further stated in the plan that the company has received permission for Surface Right on 9th June, 2017 and full-scale work is currently in progress. Because of the intervening monsoon, the regular mining operations will start from October 2017, and consistent supplies of mined raw materials are expected to commence from Q3/Q4 of April 2017-18. As per the Technical Assessment Report available with the company, SML would be able to get at least 0.7 million tons per annum of mined raw materials for its operations on a sustained basis. 9. As per the funding commitment letter dated 3....
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.... plan submitted by Mr. Mahesh Kumar Agarwal was removed and after submission of clarification sought from him, revised resolution plan dated 26th September, 2017 has been filed by Mr. Mahesh Kumar Agarwal, promoter of the SML has been approved by COC. Therefore, the objection of SREI that the resolution plan, which was rejected earlier in its 8th meeting of COC, cannot be accepted, has no footing because revised resolution plan submitted by Shri Mahesh Kumar Agarwal dated 26th September 2017 has dealt with the earlier objections raised by COC. 13. Another objection has been raised by the objector that secured creditors have been classified in Class A and Class B which is in gross violation of the Code. It is stated in the objection that if Class A secured creditors represent the financial creditors, who were forming part of the consortium have a first pari passu charge on the fixed assets/current assets of the company excluding assets and machinery individually charge to the lenders against such machinery/vehicles. 14. Class B secured creditors represent those secured creditors who are not part of the consortium and who are not having a first pari passu charge on the fixed as....